AZRE magazine January/February 2015 by AZ Big Media

JANUARY-FEBRUARY 2015

2015 OUTLOOK Arizona chases the recovery Inside: Generation Next p. 26 The future leaders in real estate 40 Companies to Watch p. 30 CRE’s trailblazing businesses

Right Angles p. 46 AIA’s Design Award winners

Our dynamic real estatereal environment Our commercial dynamic commercial estate environmen presents exciting opportunities to Our dynamic commercial real estate environment presents exciting opportunities to Our dynamic commercial real estate environment presents exciting opportunities to l estatereal owners, developers, lenders and investors. estate owners, developers, lenders and invest opportunities to investors. real estatepresents owners, exciting developers, lenders and real estate owners, developers, lenders and investors.

Buchalter Nemer real estate attorneys Buchalter Nemer real estate attorneys Buchalter Nemer real estate attorneys Nemer realadvice estate attorneys offerBuchalter sound professional and guidance offer sound professional advice and guidance offer sound professional advice and guidance when you need direction. offer sound professional advice and guidance you need direction. when when youwhen need direction. you need direction.

Paul M. Weiser, Esq. Paul2015 M. Person-to-Know Weiser, Esq. 480.383.1823

Person-to-Know Paul M.2015 Weiser, pweiser@buchalter.com PaulEsq. M. Wei

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480.383.1823 16435 North Scottsdale Road, Suite 2015 Person-to-Know 2015440 Perso pweiser@buchalter.com Scottsdale, Arizona 85254-1754 480.383.1823 16435 North Scottsdale Road, Suite 440 4 pweiser@buchalter.com pweiser@bu Scottsdale, Arizona 85254-1754

16435 North Scottsdale 440 Roa 16435Road, NorthSuite Scottsdale Scottsdale, ArizonaScottsdale, 85254-1754 Arizona

Sitting Bulls

rizona’s recovery is a bit hyperopic, compared with other states. However, the resounding chorus of industry experts reveal 2015 holds more of the same, but better! That particular phrasing is from an interview with Newmark Grubb Knight Frank’s Pete Bolton, but the sentiment is the broken record we have been listening to for the last few years. While reporting for the cover story — AZRE’s annual outlook (page 34) — I spoke with many cautiously optimistic, but optimistic nonetheless, industry experts who are developing, brokering and investing in properties and business development throughout the Phoenix Metro and Tucson areas. You can read more about their industry predictions in the outlook. I also took a step back to look at a few dozen companies that have big plans for next year in “40 Companies to Watch” (page 30). New to AZRE’s January issue is “Generation Next” — profiles of young professionals who are doing exceptional things with their careers. I like to refer to them as the under-40s with careers of over-40s. That may hover on hyperbole, but I’ll let you be the judge (page 26). Also in this issue, you’ll find an article about the symbiotic relationship between brick-and-mortar retail establishments and their digital storefronts. You may be able to tell where that one is headed with RBC Capital Markets’ report of 40,000 U.S. retail store openings planned between November 2014 and 2015 (page 54). I also encourage you to flip through the American Institute of Architects in Arizona’s Design Award results (page 46). These projects are truly stunning — from a resort in the middle of a desert wasteland to a border point of entry that is equally surreal. AZRE also congratulates the Building Owners and Managers Association of Greater Phoenix’s TOBY Award winners (page 48). I hope this issue of AZRE helps you start the year off right! May it be more of the same, but better.

Amanda Ventura Editor, AZRE amanda.ventura@azbigmedia.com 2 | January-February 2015

President and CEO: Michael Atkinson Publisher: Cheryl Green Vice president of operations: Audrey Webb EDITORIAL Editor in chief: Michael Gossie Editor: Amanda Ventura Interns: Clarissa Cooper, Brittany Dierken, Alisa Stone AZRE | Arizona Commercial Real Estate Directors of sales: Jeff Craig, Steve Koslowski ART Art director: Mike Mertes Graphic designer: Shavon Thompson Photo intern: Robin Sendele DIGITAL MEDIA Web developer: Eric Shepperd Digital coordinator: Ashley Incardone Director of digital sales: Mark Blum MARKETING/EVENTS Manager: Angela Vaughn Marketing coordinator: Lorin Parkhurst OFFICE Special projects manager: Sara Fregapane Executive assistant: Mayra Rivera Database solutions manager: Cindy Johnson Az BUSINESS MAGAZINE Senior account manager: David Harken Account managers: Ann McSherry | Shannon Spigelman AZ BUSINESS LEADERS Director of sales: Mark Blum RANKING ARIZONA Director of sales: Sheri King EXPERIENCE ARIZONA | Play Ball Director of sales: Carla Baran AZ BIG MEDIA HOME SHOWS SCOTTSDALE HOME & TRAVEL SHOW Exhibit directors: Kerri Blumsack | Tina Robinson AZRE: Arizona Commercial Real Estate is published bi-monthly by AZ BIG Media, 3101 N. Central Ave., Suite 1070, Phoenix, Arizona 85012, (602) 277-6045. The publisher accepts no responsibility for unsolicited manuscripts, photographs or artwork. Submissions will not be returned unless accompanied by a SASE. Single copy price $3.95. Bulk rates available. ©2015 by AZ BIG Media. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without permission in writing from AZ BIG Media.

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CONTENTS FEATURES

02 Editor’s Letter 08 New to Market 12 Big Deals

16 Project News 18 After Hours

20 Legislative Update

24 Executive Voices Cultivating a startup Valley

26 Annual Real Estate Outlook Companies, people and trends to watch in 2015

44 Financing Real Estate 46 American Institute of Architects AIA Arizona’s Design Award winners

48 Building Owners and Managers Association 2014 TOBY Award winners in Greater Phoenix

54 International Council of Shopping Centers Bricks vs. Clicks On the Cover: Illustration: Mill & Rio Salado development by Hayden House Tempe LLC.

2015

The RED Awards, Real Estate and Development Awards, are Arizona’s most comprehensive annual real estate awards.

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PROJECT CATEGORIES: • OFFICE • INDUSTRIAL • HEALTHCARE • MIXED-USE • MULTI-FAMILY • SAFETY AWARD

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4 | January-February 2015

AT A GLANCE

ANIMAL HOUSE

Sonoran Desert Tortoise Historic Range This map illustrates the metropolitan areas that could potentially be affected by the listing of the Sonoran Desert tortoise as an endangered species by the U.S. Fish and Wildlife Service. The tortoise was listed as a candidate in 2010. This would be the first time an endangered species listing affected developable land in Arizona’s major metropolitan areas. “There is no map available that shows what the critical habitat would look like—in this case, U.S. Fish & Wildlife will release the proposed critical habitat after the determination has been made whether to list the species,” says State Land Commissioner Vanessa Hickman, who provided this map. “Obviously, if they make a decision not to list, no critical habitat will be designated. This map shows the historic range which can give you a pretty good idea of the area that may be critical habitat.”

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YUMA

TUCSON

A I DROWNING   D E DEVELOPMENT M G I B Z A © Comparative Surface Waters in Arizona

 The areas that currently fall within the purview of “waters of the U.S.,” as defined in the Clean Water Act and interpreted by the U.S. Supreme Court  The areas that could be deemed “waters of the U.S.” if the new definition, as submitted in the proposed rule, is implemented. These maps are not regulatory, have not been approved, but rather illustrate worsecase scenario, says State Land Commissioner Vanessa Hickman, who provided the maps. Traditionally, navigable waters are protected by the Clean Water Act. Developing around them requires special permitting for discharges or dredge-and-fill activities.

STOP LOSS

According to Dodge Research and Analytics, money put toward nonresidential construction dropped by 3 percent, YTD, in October 2014, from $1.64B to $1.59B.

6 | January-February 2015

MONEY TALK

“As of May, the United States finished gaining back 100 percent of its jobs lost in the recession, but in Arizona alone, we’re only 69 percent of the way there,” said Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business, at the 51st annual Economic Forecast Luncheon.

PAY STUBS

■ Arizona ranked No. 12 for job growth in October (at 2 percent) ■ McPheters predicted that Arizona will regain 96,400 jobs by early 2016 at the 51st annual Economic Forecast Luncheon.

FOOT TRAFFIC

Industrial rental rates rose by $6.47/SF/month by 3Q 2014 Source: Newmark Grubb Knight Frank U.S. Market Report for Phoenix



ArizonA SAle leASebAck Portfolio 31 Assets 173,934 Square Feet 4 Sub-Portfolios $3.9 Million NOI Long-Term Net Leases

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Premier locations throughout Arizona including Phoenix, Scottsdale, Chandler, Cave Creek, Sun City, Gilbert & Tucson www.jllexchange.com/property/bmo-harris-bank-arizona-portfolio For more information please contact: Guy Ponticiello Managing Director 312.228.2645 guy.ponticiello@am.jll.com

Rob Bickel Managing Director 213.239.6141 rob.bickel@am.jll.com

Maury Vanden Eykel Vice President 312.228.2615 maury.vandeneykel@am.jll.com

Brian Ackerman Senior Vice President 602.282.6247 brian.ackerman@am.jll.com

New to Market MIXED USE



Rivulon DEVELOPER: Nationwide Realty Investors General contractor: N/A Architect: Butler Design Group, Inc. Location: Gilbert Road and the AZ Loop 202 in Gilbert. Ariz. Size: 250 acres (3MSF office, 500KSF retail, 250-room hotel) Brokerage Firms: Lee & Associates (office); De Rito Partners (retail) Value: $750M Start/Completion: Fall 2014 to fall 2015 (phase one)

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This mixed-use project, amid literal hay fields in Gilbert, Ariz., includes infrastructure upgrades of Gilbert and Pecos roads, a three-story, 150KSF office space already leased by Isagenix that will be delivered in December 2015. The 3MSF of office includes two speculative buildings expected to be completed by fall 2015. The first phase also includes a 45KSF LA Fitness and 17KSF retail center. Nationwide Realty Investors has been developing in Arizona since 1987 and controls more than $1.4B in real estate investments nationwide.

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OFFICE

 | Crown Castle DEVELOPER: MDB CCI Chandler, LLC General contractor: LGE Design Build Architect: LGE Design Build Location: SEC Germann Road and Stearman Drive in Chandler, Ariz. Size: 70KSF Brokers: Keith Lambeth, Ryan Timpani and Todd Noel, Colliers International Value: $15M Start/Completion: September 2014 to July 2015

The class-A, back office building will cover more than 70KSF on a 8.9-acre site and features a cantilevered second floor conference room, tilt concrete construction, one-foot dual pane high performance glazing, polished concrete floors, exposed structure designs, large outdoor park for employees and a parking ratio of more than six spaces per 1KSF. Total project timing including design, engineering, permitting and construction is 14 months.

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 | Aerium DEVELOPER: Landmark Homes USA General contractor: LGC Construction Architect: OTAK Location: 6990 E. Sixth St., Scottsdale, Ariz. Size: 61,788 SF BROKERAGE Firm: Engel & Völkers Scottsdale Value: Townhome prices will range from the high $300s to the high $400s Start/Completion: December 2014 to December 2015 Subcontractors: Rick Engineering, Rapi, Vann Engineering, Universal Underground, Ridgeline, Skyline Steel, Rnado, Recreate, Apex Iron, KT Electric, SDL, European, Red Rock Curb, JFN Mechanical, AZ Fire Protection, RT Brown, Digital, Contractors Termit, Paramount Windows, All Valley, Nystrom, Design Plastering, Central Valley, Gale Contractor Service, Paul Johnson, Cont Door & Millwork, On-Track, Access Gates, Wallco, Distinctive Custom Cabinetry, AZ Wholesale, Stone Systems, Marin Shower & Mirror, Ferguson, General Electric, Mammoth, LJ’s Cleaning Solutions, Exterior Systems, PLS, Eco Smart, Jack Pot Sanitation, Wrap Up Resources, CertFocus

MULTIFAMILY

Aerium features 27 soft contemporary townhomes ranging from 1,414 to 1,830 SF, two to four bedrooms and 2.5 to 3.5 baths. Three floor plans feature attached garages, oversized balconies, private patio/courtyards and open-tread staircases, sustainable quartz countertops, and Bertazzoni ovens available in authentic Ferrari colors. Chef-inspired kitchens and spa-inspired master bath options are also available. There are 19,200 SF of open space and amenities that will include a lap pool, organic herb garden and outdoor cooking facilities where local chefs will be brought in occasionally to prepare locally grown dishes that incorporate pairings from the Aerium garden.

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MULTIFAMILY

 | The Enclave at Borgata DEVELOPER: Antera Development General contractor: Wespac Architect: Davis Location: 6166 N. Scottsdale Rd., Scottsdale, Ariz. Size: 90 units; 4.77 acres Start/Completion: 2Q 2015 to 4Q 2016

The Enclave at Borgata includes 90 luxury condominium residences, featuring soft contemporary design and resort-like amenities, all

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MULTIFAMILY

 | 421 West 6th Street DEVELOPER: Symi Developments General contractor: Decca Contractors Architect: Bing Hu, H&S International Location: 421 W. 6th St., Tempe, Ariz. Size: 24 units Brokerage Firm: Devstar Value: $10,264,800 Start/Completion: November 2014 to August 2015

within walking distance to many convenient amenities. Floor plans at The Enclave at Borgata will range between 1,500 to 4,100 SF and feature one-, two- and three-bedrooms, with special attention paid to both indoor and outdoor living spaces, while also taking advantage of the dramatic backdrop of Camelback Mountain. This luxury community will feature a gated entry, concierge services, generous fitness center, demonstration kitchen, club room, resort style pool, pet park and numerous lounging spaces to socialize and stay connected with neighbors, as well as below-ground parking and storage. 9

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G I SHAPING B Z A FUTURE

PHX Open

ULI Arizona

Trends Day Conference

PHX Open THE BIG GAME

THE

Pro Bowl

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Arizona’s Drive to Excel

Keynote Speaker:

Rick Reilly Award winning journalist, legendary sportswriter, and 11-time National Sportswriter of the Year Winner.

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arizona.uli.org

WHAT?

10th Annual Trends Day Conference

WHERE?

The Phoenician Scottsdale, Arizona

WHEN?

January 28, 2015 7:15AM - 4:00PM Reception 4:00PM - 5:00PM Masterplan Jam 4:30PM - 6:30PM

Title Sponsor

There’s no such thing as a “small” deal in this industry, coming out of a recession. However, it’s the big deals, and the brokers who make them, that make the market an interesting one to watch. In every issue, AZRE publishes the top five notable sales and leases that have occurred one month out from publication based on research compiled by Cassidy Turley and Colliers International with CoStar.

Industrial/Sales

Office/Sales

1. PS Business Parks, Portfolio in Greater Phoenix 658,936 SF; $53.16M Buyer: Stockbridge Capital Group, LLC Seller: PS Business Parks, Inc. Listing BrokerS: Bob Buckley, Tracy Cartledge, Steve Lindley and Ben Geelan, Cassidy Turley 2. Roosevelt, Parkland and Wilson centers, Tempe 355,371 SF; $26,449,349 Buyer: DCT Industrial Trust Seller: Deutsche Asset & Wealth Management Listing BROkerAGE: Cassidy Turley

4. 1715 S. Holbrook Ln.; 1895 S. Los Feliz Dr., Tempe 140,315 SF; $12,452,956 Buyer: Industrial Property Trust Seller: American Realty Advisors Listing BrokerAGE: HFF

5. Chandler Business Center, Chandler 130,678 SF; $11.1M Buyer: Montana Avenue Capital, LLC Seller: LIT Millenium, Inc.

BIG DEALS is sponsored by

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2. U.S. Bank Center, Phoenix 373,013 SF; $55,853,792 Buyer: ScanlanKemperBard Companies Seller: Angelo, Gordon & Co. Listing BrokerAGE: Eastdil Secured, LLC

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3. Arrowhead 101 Business Park, Peoria 220,324 SF; $$18.275M Buyer: First Industrial Seller: The Mack Company Listing BrokerAGE: CBRE

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Tracy Cartledge

Steve Lindley

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Freeport-McMoRan Tower, Phoenix 249,012 SF; $110M Buyer: American Realty Capital Properties, Inc. Seller: National Real Estate Advisors Listing BrokerS: Jim Fijan and Will Mast, CBRE Bob Buckley

Top 5 Notable Leases and Sales (OCT. 1 to NOV. 30, 2014) Source: Cassidy Turley Research Department, Colliers International and CoStar

3. Webb Medical Plaza Building, Sun City West 71,515 SF; $23.35M Buyer: MB Real Estate Seller: Healthcare Trust of America, Inc.

Jim Fijan

Will Mast

4. Palm Valley Office Park, I & II, Goodyear 83,971 SF; $15.35M Buyer: K2H Palm Valley LLC Seller: Palm Valley Office Park Listing BrokerAGE: Cassidy Turley 5. CIGNA-Sun City, Sun City West 45,420 SF; $14.2M Buyer: MB Real Estate Seller: Healthcare Trust of America, Inc.

Ben Geelan

Chandler Viridian

Firm: Hines Build: Chandler Viridian – A mixed use development Loan: $7.22 million acquisition/land development loan, financed by Alliance Bank of Arizona

LAND/Sales

MULTI-FAMILY/Sales

RETAIL/SALES

1. Mirabella I & II, Avondale 715 units; $66.5M Buyer: Fowler Property Acquisitions LLC Seller: Fore Property LISTING Broker: Ryan Fitzpatrick, HFF

1. SanTan Village Marketplace, Gilbert 250,879 SF; $135,018,096 Buyer: DDR Corp. Seller: American Realty Capital Properties, Inc.

LISTING #3, Rendering of development plans by Hayden House Tempe, LLC

1. North Vista Verde, Rio Verde 678 acres; $59.5M Buyer: Shea Homes of Phoenix, Inc. Seller: JEN Partners LLC Brokerage: Nathan & Associates, Inc. 2. Cooley Station, Gilbert 114.5 acres; $22,905,900 Buyer: Fulton Homes Corporation Seller: Jeffrey L. Cooley, PC Brokerage: Western Horizons Inc. 3. SWC Mill Avenue and Rio Salado Parkway, Tempe 2.51 acres; $16.875M Buyer: Douglas Wilson Companies Seller: Michael Monti’s Restaurant & Catering, Inc. Brokerage: Cassidy Turley 4. Chandler Viridian, Chandler 11.4 acres; $14,086,653 Buyer: Alliance Residential Company Seller: Hines

2. San Norterra, Phoenix 388 units; $62.5M Buyer: Richmark Holdings, Inc. Seller: Equity Residential/Mark-Taylor LISTING Brokerage: HFF 3. Level at Sixteenth, Phoenix 240 units; $41.15M Buyer: Abacus Capital Group LLC Seller: Cornerstone Real Estate Advisors LISTING Brokerage: Marcus & Millichap 4. Indigo Creek Apartments, Glendale 408 units; $40.5M Buyer: Bascom Arizona Ventures, LLC Seller: Falcon Southwest LISTING Brokerage: Marcus & Millichap 5. Autumn Ridge, Phoenix 672 units; $35.9M Buyer: Domain Communities Seller: Summit Equity Investments LISTING Brokerage: Colliers International

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2. Promenade & Fulton Ranch Towne, Chandler 212,173 SF; $47.85M Buyer: Whitestone REIT Seller: RED Development LISTING Brokerage: CBRE

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5. Chandler Viridian, Chandler 14.95 acres; $12,170,929 Buyer: Hines Seller: The Macerich Company

Ryan Fitzpatrick

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Kyrene Village, Chandler 143,129 SF; $18.55M Buyer: Kyrene Shopping Center, LLC Seller: Arizona Partners Retail Investment Group LISTING Brokerage: REZA Investment Group 4. 2711 S. Santan Village Pkwy., Gilbert 105,220 SF; $17.95M Buyer: Tri Star Marketing, Inc. Seller: De Rito Partners, Inc. 5. Peoria Crossing, Peoria 51,200 SF; $13.7M Buyer: El Rancho Development, Inc. Seller: Urbahns Co. Inc. LISTING Brokerage: Farris Lee Investments

Where Experience Meets Opportunity

BIG DEALS is sponsored by

Paul Engler

When Chris Anderson, Managing Director of Hines needed to secure $7.21 million for the acquisition and land development of Chandler Viridian, a mixed-used development across from Chandler Fashion Center, they called on a strategic partner who shares their passion for performance. They called on Alliance Bank’s Senior Vice President Paul Engler, a 23-year commercial real estate veteran. 13

Industrial/Leases

Office/Leases

Retail/Leases

1. 3836 W. Buckeye Rd., Phoenix 45KSF Landlord: D.F. Properties, Inc. Tenant: Hickory Spring Landlord Broker: Andy Cloud, Cassidy Turley TENANT Brokers: Bruce Calfee and Josh Wyss, Cassidy Turley

1. Waypoint, Tempe 110KSF Landlord: Harvard Investments Tenant: American Traffic Solutions

1. Greenway Park Plaza, Phoenix 27KSF Landlord: Arizona Greenway Hirani Investment, LLC Tenant: Ross Landlord Broker: Andy Kroot, Velocity Retail Group LLC TENANT Broker: Neil Board, Western Retail Advisors

2. Kyrene 202 Business Park, Chandler 44,602 SF Landlord: Eastgroup Tenant: Stonecreek Furniture Landlord Brokers: Colliers International TENANT Brokers: Levrose Commercial Real Estate

Andy Cloud

Bruce Calfee

Josh Wyss

4. 202 Business Park, Chandler 34,795 SF Landlord: Germann Road Land Development, LLC Tenant: Potato Barn Landlord BrokerAGE: JLL TENANT Brokers: Sperry Van Ness 5. 1341 W. Industrial Dr., Coolidge 33,818 SF Landlord: 1340-1349 Industrial LLC Tenant: Agronomy Innovations Landlord BrokerAGE: Cassidy Turley

BIG DEALS is sponsored by

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3. Baseline Corporate Center, Tempe 26KSF Landlord: Orsett Properties Tenant: SpringLeaf Financial Landlord BrokerAGE: CBRE TENANT BrokerAGE: Lee & Associates

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3. Elliot Corporate Center I, Tempe 43,671 SF Landlord: Everest Holdings Tenant: Transperfect Landlord BrokerAGE: JLL TENANT BrokerAGE: JLL

2. Thisle Landing Office Park, Phoenix 101,043 SF Landlord: Everlast Holdings, LLC Tenant: Fiserv, Inc. Landlord Brokers: Lee & Associates TENANT Brokers: JLL

4. One MacDonald Center, Mesa 24,439 SF Landlord: Omninet Capital Tenant: Arizona Department of Child Services Landlord BrokerAGE: Cassidy Turley TENANT Brokers: JLL 5. Element at Kierland, Scottsdale 24KSF Landlord: Montana Avenue Capital Partners Tenant: SheKnows Landlord Brokers: CBRE TENANT Brokers: Keyser

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Andy Kroot

2. Foothills Park Place, Phoenix 22,565 SF Neil Board Landlord: Foothills Shopping Center, LLC Tenant: Goodwill Landlord BrokerAGE: ZELL Commercial Real Estate TENANT BrokerAGE: Velocity Retail Group

3. Scottsdale 101, Scottsdale 22,252 SF Landlord: Cornerstone Real Estate Advisers, Inc. Tenant: Potato Barn Landlord BrokerAGE: The Macerich Company TENANT BrokerAGE: Sperry Van Ness

4. Tempe Marketplace, Tempe 20KSF Landlord: Vestar Development Company Tenant: H&M Landlord BrokerAGE: Vestar Development Company 5. Autoshow Avenue and Waddell Road, Surprise 17,701 SF Landlord: Sparrow Family Trust Tenant: Subaru

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DETERMINATION.

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License B1-088897

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480.497.2300 • fax: 480.497.9610 www.bjerkbuilders.com

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PROJECT NEWS

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G I PROJECT NEWS B Z A © ➤ TIME AFTER TIME The historic Hayden House in Tempe (built between 1871 and 1873) was the birth place of Arizona Rep. and Sen. Carl Hayden in 1877. Over the years, it was converted to a boarding house and eventually a restaurant known as Monti’s La Casa Vieja. The 2.51-acre property, purchased by Hayden House Tempe LLC, a partnership between San Diego, Los Angeles and Colorado companies (Douglas Wilson Companies, Hensel Phelps Development LLC and Karlin Real Estate), will be

16 | January-February 2015

redeveloped into a mixeduse office and lifestyle-hotel development, called Mill and Rio Salado, featuring a 15-story, 280KSF class-A office space and a 16-story, 274-key Kimpton hotel with 17KSF for restaurants and retail. This restaurant will be preserved and renovated. The overall project cost will be $200M, beginning in mid2015 and ending in 2017.

➤ GOING WITH THE GRAIN Hayden Flour Mill will get an update from the inside out with the help of Chicagobased Baum Development, Aparium Hotel Group, SmithGroupJJR and Sundt Construction Inc. The five-acre parcel featuring a historic flour mill will transform into a boutique hotel, dining and retail and a 4,000-seat amphitheater.

➤ THE PRICE IS RIGHT Douglas Allred Company announced three new projects at the 150-acre Park Place office complex are under construction — a business hotel, dining and retail project and 92KSF, class-A office building. Drury Development Corporation will develop the eight-story, 210-room Drury Inn & Suites. The development is in Chandler’s Price Corridor.

Left: Mill and Rio Salado development by Hayden House Tempe, LLC. Below (left to right): Esplanade renovation rendering; Park Place; Coldwater Depot Logistics Center, phase III; Encantada lobby by HSL Properties.

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➤ DOWNTOWN DIGS Georgia-based Wood Partners purchased two downtown land parcels with intent to develop a 220-unit apartment complex known as ALTA Fillmore. Two commercial buildings on the lots will be demolished prior to development, which will begin in 2Q 2015. WP West Builders Arizona is the contractor.

➤ HOME STRETCH Trammell Crow Company and Clarion Partners began construction on phase three of the Coldwater Depot Logistics Center with completion estimated at 2Q 2015. This is the final phase of the 66-acre industrial park.

➤ SOUTHERN BELL HSL Properties, Inc. announced the ground breaking of its $46M, 368-unit luxury apartment home community in the Tucson National area of the northwest Tucson Metro. The project, Encantada at Tucson National and contracted by HSL Construction Services and designed by Eglin + Bresler Architects PC, will be completed by fall 2016.

➤ ESPLANADE RENOVATIONS Through the beginning of 2015, the Esplanade will undergo renovations to its ground plane and retail space. Improvements to its entry points, walkways and central corridor are among the main focuses. Gensler has been tapped as the design firm for the renovations by owner MetLife. CBRE will manage the renovations.

AFTER HOURS take all the great things we do and are able to do well at Caswells and add in the elements that we could not offer — such as corporate events, parties and the simulator experience — and package that into a new facility in a great location. To date, the response we receive from our customers has been great.

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E BOE BERGESON IS AT HOME M AT THE RANGE G I B Z A © SHARPSHOOTER:

PHOTO BY MIKE MERTES/AZ BIG MEDIA

By Claire Cooper

Boe Bergeson

Managing partner and developer, RJM Construction Owner, C2 Tactical (opened in 2013)

Boe Bergeson is a managing partner and developer at RJM Construction, but in his spare time he owns and operates C2 Tactical gun range in Tempe. Bergeson said the gun range is a great way to stay connected to the community in the East Valley and helps support the gun community. Bergeson’s gun range also came with the idea for the phone app “Zombies in Phoenix.” C2 Tactical offers several zombie packages for a unique twist on the gun range experience, and the app offers consumers the ability to simulate those experiences. In addition to real estate and shooting, Bergeson’s adventurous interests include skiing, scuba diving and fly fishing. What did you think you’d be when you grew up?

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Why are you passionate about C2 Tactical? It’s a great business that creates opportunity for people from all walks of life. I enjoy the development side of what we do, and I have fantastic business partners, great managers and employees that execute our mission within the business operations. It’s exciting to create a new facility the supports an industry and way of life that we are passionate about while creating jobs for people and a great experience for firearm enthusiasts (new and old, male and female).

I had a pretty active imagination as a kid and still do. That said, when I do grow up I will let you know. In my younger years, I always had an interest in development/ construction and always wanted to own my own business. I feel fortunate that I have the ability to do both at this stage in my life with RJM and C2 Tactical. What is the best business advice you’ve been given? There is an opportunity in every situation and every business dealing. The key is to find it. Try to see that opportunity. Don’t dwell on the problems. Find solutions, look to capitalize on that opportunity for you and your business, partners and project team(s). What made you want to get involved with C2 Tactical? I knew from our ownership and involvement in Caswells (shooting range) in Mesa that the East Valley was ready for new indoor shooting experience. I wanted to

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Tell us about the phone app inspired by C2 Tactical. The inspiration for the new game app comes from a few unique features and things we are doing at C2: • One of the great things about C2 Tactical is its fun nature, culture and commitment to being a friendly family environment. We wanted to continue that trend in a very real and active environment on individuals’ phones. Our ability to take our brand to an app for phones and tablets lets folks enjoy a fun extension of C2 Tactical during their day when they cannot be at the range. • We also wanted to be able to tie some of our in-store offerings into a game application that keeps our current and future customers excited about their next trip to C2 to enjoy the indoor shooting experience (out on the range with a zombie package or in the simulator with a zombie scenario). • We also like the ability of our game app users to be able to play online, accumulate points and redeem those points for in-store value on real goods and services. We’re excited to be able to reward our customers for their time investment they have spent with us online. Read more online at azbigmedia.com/azre

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2015 Annual Sponsorships

NOW AVAILABLE! Find Out More At:

valleypartnership.org

Announcing AZCREW’s 2015 Board Members

CHRISTINE OLSON PRESIDENT

CHRISTIE VELDHUIZEN PRESIDENT ELECT

EMERY HILL TREASURER

CARRIE TEMPLE SECRETARY

JACKIE ORCUTT MEMBERSHIP CHAIR

JACI NOEL SPONSORSHIP CHAIR

KRYSTAL DILL PR/COMM. OUTREACH CHAIR

ALISA TIMM SPECIAL EVENTS CHAIR

SAMANTHA PINKAL PROGRAMS CHAIR

CINDY WINTERS GOLF CHAIR

VAL MARCIANO GOVERNANCE

VICKI WILLIAMS PAST PRESIDENT

Legislative Update

READING BETWEEN THE LINES OF PROCESS AND PROGRESS

he members of Valley Partnership are optimistic that 2015 could finally bring the arrival of the elusive economic recovery that has yet to take hold in the Phoenix Metropolitan. The organization will be working on many fronts to foster a favorable environment for development and redevelopment to ensure process does not stand in the way of progress. At the local level, the Valley Partnership City/County Committee will continue to work closely with municipal partners to address ways to expedite development without compromising careful consideration of development proposals. As the volume of development has ticked up for commercial projects, neighborhood groups have activated, calling on city councils to tighten regulations on existing and future projects. The committee is focused on new municipal regulations to address these issues and will work with councils, staff and

citizens to navigate a path forward that is sensitive to neighborhood concerns while enabling growth. The Valley Partnership Legislative Committee will maneuver through similar terrain as the 2015 legislative session begins. Valley Partnership will be urging a “do no harm” approach to legislators, with a proactive push toward the continued streamlining of regulatory requirements. We also will advocate for the continuation of policy set in the Brewer Administration in the form of an executive order that halted all non-necessary regulation by state agencies. This “rule-making moratorium” expired on Dec. 31, 2014, and governor-elect Doug Ducey has pledged to consider continuing the measure. Valley Partnership will support the continuation of this policy and other efforts to eliminate regulations that unnecessarily impede progress. Finally, the Federal Affairs Committee is engaged with Arizona’s congressional

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BOMA’S CALL TO ACTION WEEK

he start of the 52nd Arizona legislative session is just around the corner and throughout the session BOMA Phoenix will closely monitor the bills that are introduced. Each year, its advocacy committee watches the legislative action for issues that affect the commercial real estate industry, but the best part of our endeavor is Advocacy Week (Feb. 16 to 20). During Advocacy Week, BOMA’s advocacy committee spends the better part of each day at the state capitol, meeting with legislators, attending sessions and hearings, and enjoying the atmosphere of government in action. Prior to Advocacy Week, the committee reserves a number of meetings with targeted legislators. BOMA

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staff researches each legislator and their voting history, providing committee members with vital information before meeting with lawmakers. BOMA typically sends two committee members to each meeting, armed with information on BOMA and specific bills the organization’s chapter supports or opposes. BOMA has found senators and representatives to be very amiable and willing to listen, if not always to vote in BOMA’s favor. Legislators recognizes that BOMA members are real estate and building industry professionals, and lawmakers value the viewpoint and information they bring. Overall, Advocacy Week is an interesting time for BOMA’s committee. The lawns outside the legislative

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delegation to comment on and influence regulations coming out of Washington that will negatively impact Arizona’s economy. Specifically, sweeping new rules could vastly expand the way the Clean Water Act applies to “waters” in the state, the impact of which could be compounded by the designation of several new endangered species. As always, Valley Partnership remains committed to its mission of responsible growth and working with members to make 2015 a prosperous year.

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Carolyn Oberholtzer Partner, Bergin, Frakes, Smalley & Oberholtzer

Alisa Lyons Principal, SLOAN LYONS Public Affairs

Provided by Valley Partnership City/County Committee

buildings become a bit of a circus atmosphere when the legislature is in session, and the committee enjoys the camaraderie within itself as well as the integration of other groups that descend on the state capital. There are other real estate organizations advocating for Randy L. Barnes the industry alongside BOMA, Principal at RBA Architecture, BOMA but we can always use more Greater Phoenix advocacy voices. BOMA encourages committee chair you to get involved with your group, write your legislators and help protect and grow our industry.

UNWELCOME RAISES GROWING CONCERN FOR A

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Raising new taxes is not the answer

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ob recovery has been sluggish as it relates to commercial real estate. However, if the cranes near ASU are any indication, economic activity appears to be looking up. It’s also encouraging the U.S. Bureau of Labor Statistics revised upward the number of national non-farm jobs created in August and September and that job gains through 10 months in 2014 were on average 228,500 per month, or 14 percent more than in 2013. Adding to this optimism was the election of pro-business gubernatorial candidate Doug Ducey, who has vowed to make job creation his Tim Lawless first priority. It NAIOP-AZ president is expected that one of his first actions will be the continuation of a moratorium on new rules and regulations that impede job creation. We can also expect him to make many forays into California so that the jobs that leave that state come here rather than elsewhere.

To be sure, the current state budget deficit and a more daunting structural deficit the following year will be felt by all due to expected spending cuts. The budget situation, however, creates the opportunity to reform many aspects of state and local government service delivery not the least is K-12 education. Certainly, we can do a better job to get more money as a percentage of every dollar spent into the classroom than we did since the passage of Prop. 301 in 2000. Because of the budget, NAIOP-AZ’s top state priority will be to preserve the assessment ratio reduction savings for commercial property taxation passed into law in 2011 (HB2001). We need to send the signal that we will continue to address our top impediment to economic development which are high commercial property taxes. Along with Ducey, NAIOP-AZ will fight any effort to impose new taxes on business which includes a new temporary sales tax rate increase or to expand the sales tax base to include currently exempt goods and services from the State base such as commercial leases.

ith the state facing a significant budget deficit for next fiscal year, the AIA Government Affairs committee members are growing concerned as to when or if we will ever see a fully restored HURF and other infrastructure investments. We believe investing in infrastructure is in part crucial to an economic recovery. Tied into this is also the desire for greater funding for the school facilities board, which we can only surmise will not be coming forth in 2015. Innovative project financing is increasing the John Glenn Associate of the American use of alternative project Institute of Architects in delivery methods such as Arizona and government public-private partnerships affairs co-chair (P3), which allow for design/build/finance/maintenance and may require legislation to clarify the process. We continue to track PACE legislation as we meet with strategic partners. Right now, we’re studying what was done in Connecticut to get PACE passed legislatively and to learn how the state built consensus with the local bankers association. Last session, we saw a bill surfaced that ultimately died, which would require school districts to sell unused school buildings and properties to charter schools. We believe that this will surface again next session, and we’re watching very closely for it. Along similar lines, we would be concerned if we saw legislation reintroduced this session that would curtail bonding capacity of school districts. Parallel to legislative matters we also plan to watch what the new corporation commission intends to do as it pertains to energy efficiency standards and how the commission’s two newest members will wade in. The committee is eagerly awaiting possible legislation this session that would ease some regulations and allow the expansion of Arizona micro and craft breweries. 21

Legislative Update

SWEEPING CHANGES FOR CONTRACTOR TAX CLASSIFICATIONS T

he Arizona construction industry is bracing for sweeping changes to the prime contracting tax law in January of 2015. The legislature has enacted changes that range from who must have a tax license to a major switch creating a difference between service and prime contracting. The Arizona Builders Alliance is working with the Department of Revenue and industry allies to understand these changes disseminate information to the industry and prepare needed amendments to the law. In 2011, the Legislature attempted to create a study committee to address concerns in the prime contracting area. That bill failed, but the governor appointed a study committee in 2012 that looked at prime contracting, service work, tax evasion in prime contracting and enforcement issues in the construction industry. The study committee recommended that the legislature terminate the prime contracting category and switch to taxing material at its point of sale. That provision was torpedoed by Arizona cities that feared a shifting of taxes payments from where work is being done to where materials are

being purchased. However, the efforts of the legislature and the governor’s office had created an impetus for change. The momentum of that effort caused the folks in politics to want to make some changes — and changes they did make! The pending changes include dual tax treatment for contractors purchasing material for new construction versus service and repair work. Under this proposal, a contractor purchasing material for service work would pay tax on the material at the point of sale. The same exact material purchased for new construction would be tax exempt until incorporated into a project; where it would be taxed under the prime contracting scheme. This assumes the contractor would know the intended use of material at the time it was purchased. Other changes include: • Removing from prime contracting work done under maintenance, repair, replacement and alteration of existing facilities, so called “MRRA” activities. • MRRA activities must be done under a contract for the “property owner.” It is unclear whether work contracted with a property manager or tenant is

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covered or whether multi-tiered work of a subcontractor is included. • Change orders will be treated as separate contracts. • Contractors who only do MRRA Mark Minter work only will no Executive director longer be required Arizona Builders Alliance to have a TPT license with the Department of Revenue. • Projects with elements of prime contracting and MRRA will be considered as MRRA projects as long as the prime contracting element remains less than 15 percent of receipts. The Arizona Builders Alliance plans to introduce legislation to address several of these areas. One of the proposed changes would address contractors doing both prime contracting and MRRA work. The change would allow those contractors to purchase all material tax exempt and then treat the material to the tax status of the project in which the material is incorporated. The ABA is working with the League of Cities, Associated General Contractors, Construction Financial Managers Association and others to develop legislation for next year’s session.

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SUSTAINING MOMENTUM or 36 years, the Urban Land Institute has partnered with PwC to provide one of the most highly regarded and widely read forecast reports in the land use and real estate industry. Since land use and real estate’s value is a function of how it serves its users – workers, consumers, businesses, travelers, homeowners, apartment renters, etc. – it’s necessary to look to human elements and the physical attributes of the built environment for signs of trends. THE CHANGING AGE GAME The Millennials are an even bigger cohort than the baby-boom generation, which has been shaping U.S. economic geography, marketing, consumption, and real estate land use since the 1950s. The Millennials have been much talked about, but for all their impact thus far, there is much more to come. And the changes will

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accelerate and become more complex over the next ten years. Painting them with too broad a brush will lead to misplaced expectations – as it has with the Baby Boomers. One size will not fit all Millennials. And while we’re at it, let’s not forget the smaller “generation Z” coming along next. TIME TO GET SERIOUS ABOUT INFRASTRUCTURE The U.S. is not investing in the physical facilities needed to compete into the future. The trend across the country and in Arizona is not good, and it is going to be painful for land use and real estate development if problems are left to worsen. One private equity firm noted, “Infill is the key to opportunity in strong markets, but it is a challenge when transportation and utility infrastructure is old and seriously underfunded.”

TECHNOLOGY Not a single form of real estate is exempt from the exponential expansion of technology. Technology, disruptive and incremental, is pushing change in land use, space use, locations and demand levels at an Deb Sydenham accelerated pace. “What FAICP, executive director, does a world of driverless ULI Arizona District Council cars and drone deliveries mean for the acres of parking lots surrounding shopping malls?” Tackling issues effectively can enhance land use and property markets, while ignoring them threatens the general economy. Read the full report at uli.org.

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EXECUTIVE VOICES

A I D E EAST VALLEY CITIES M G I B COME Z TOGETHER OVER A STARTUP CULTURE © By Amanda Ventura

he definition of a startup depends on who’s answering. The general consensus does seem to be a new, small company. The threshold of being a startup and a young business can be defined by revenue, company size, an acquisition or a new office space. What’s more important, experts say, is the culture that comes with having a “startup culture.” It’s a burden multiple cities are shouldering, from Chandler’s Gangplank to SkySong in Scottsdale. A classic example is InfusionSoft’s expansion through different locations

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in Gilbert before landing its most recent location in Chandler. Heliae, which started at ASU Tech Park before relocating to SkySong and finally Gilbert, in a span of three years is another example of crosscity commitment to retaining a startup. Gangplank co-founder Derek Neighbors says that even though one city lost the company to another, there’s still an idea that at least InfusionSoft stayed in the East Valley. Cities are now collaborating just to keep companies in Arizona. Once a startup company leaves Arizona,

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PHOTO BY MIKE MERTES/AZ BIG MEDIA

Neighbors says, it probably won’t come back. It’s just less expensive for a company to move to its chosen headquarters when it still only has a few employees. Tanga.com, which made the 2014 Inc. 500|5000 list of America’s fastest growing private companies, is now moving into a business park in Chandler. The company, which has grown about 220 percent over the last few years has increased its employee base from six to 35. For Neighbors, it comes back to culture. While local success stories pave the way for growing companies, Neighbors says about 30 percent of the companies that use Gangplank’s educational resources, business services or co-working space leave Arizona. While some of the motives include a perceived lack of smart capital or lack of understanding of tech-related products, there are also a few real estate-related issues at play. “There are many reasons a startup will chose to expand but those reasons are outside of the control of the community,” says Gilbert’s Economic Development Director Dan Henderson. The city is hoping that the 3.3MSF mixed-use development Rivulon will attract more venture capitalist to

ELBOW ROOM: SKYSONG EXPANSIONS AMONG STARTUPS

Yodle: Started in 1,946 RSF, now occupys 26,521 RSF. About to sublease Suite 140, which will take them to 38,412 RSF WebFilings: Started in 2,100, now in 16,245, about to grow to 36,020 RSF Nuon/Monarch: Started in 2,100 SF, expanded into 5,352, and about to grow to 12,586 RSF Global Patent Solutions: From 3,110 to 7,991 RSF Ticketmaster: From 33,335 to 36,380 RSF American Solar: From 4,917 RSF to 8,205 RSF Atom Design: From 2,073 to 4,019 RSF

Gilbert, and thus money to invest in the start-up culture. “Our citywide goal is to attract, retain and grow business and industry. Working with entrepreneurs and developers we’re able to meet needs of early stage startups to Fortune 500. In that community development focus, there is a diversity of real estate options,” says Henderson. One issue developers and brokers should keep in mind, Neighbor says, is that these startup companies are looking between 2KSF and 6KSF of office space — not 40KSF. The other issue, he says, is that startups can’t sign five-year leases. There is no telling how fast a company will grow and how real estate demands will evolve over the time of a five-year loan. It’s much easier to find that space in San Francisco, Portland or Seattle, says Neighbors. Developers here, he says, don’t understand startups. “It’s about having a full ecosystem,” he says. “Whether it’s co-working places or incubation places for twoperson companies to start and grow and having a place for them to move into their next stage of 30, then 100 or 200 employees. As a region, we need to have that full spectrum to be collaborative as cities and commercial

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real estate partners.” Henderson says Gilbert has looked at offering incubating, co-working and accelerator models to help entrepreneurs during different stages of their growth. It has also made the SizeUp tool available to companies that want to evaluate a product’s competitiveness and target market. About half of ASU SkySong’s incubator businesses are startups. Developed by Plaza Companies, SkySong has become one of many East Valley hubs for the startup culture. “Our region as a whole will be well-served by the kind of economic development that takes place organically within our community, and that’s what the startup culture provides,” says Plaza Companies President and CEO Sharon Harper. “SkySong has played an important role in establishing that culture as well as providing a destination for out-of-state businesses to consider. “Helping companies grow through incubators has widespread benefits to the economic environment, including job creation and economic impact. Commercial real estate is a component of that — when we are growing companies from within our state, we are creating economic

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impact without having to rely on companies coming in from outside our state. So it’s another important pillar in our community’s economic growth with significant impact on commercial real estate.” One brokerage has recently taken a keen interest in placing tech startups. Ryan Bartos, Associate Director of Tenant Advisory at Cushman & Wakefield, is a Millennial heading up the Phoenix office’s new C&W TechBeat effort. He and his partner at Cushman & Wakefield, Matt Coxhead, helped place Weebly, from San Francisco, as well as New York-based startup LearnVest into SkySong. “It’s fun to work with these companies; they have great energy,” Bartos says. “They don’t want traditional office space. They need someone who understands and a landlord who is creative and flexible.” Sometimes that flexibility comes in a special termination clause or trading abatement requests for lower rent. “I think it’s great time for Phoenix, and we’re going to see more firms from California relocate to the Valley,” he says. “With firms moving from the Bay Area at an enterprise level, like Weebly, it further validates that our market is able to sustain that industry.” 25

next DEVELOPMENT Generation

The ladder to leadership By BRITTANY DIERKEN

hen Chris Brozina, vice president of Mark-Taylor, worked as a broker at CBRE, his team transacted more than $1.59B of multifamily transactions in seven states. In 2011, he made the decision to move into development with Mark-Taylor. He reveals to AZRE his steps to climbing the ladder of success, while sustaining his humility and connecting with his employees on a personal level. Have you always been interested in real estate or did you start on a different career path? As a young person coming into the industry in 2007, right into the teeth of the Great Recession, I was a young kid who didn’t have any money and didn’t have a whole lot to lose. The timing probably allowed the opportunity to accelerate through the ranks a little faster than what otherwise would have been the case.

CHRIS BROZINA, 30 Vice president Mark-Taylor, Inc.

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Where did your real estate career start? I started as a researcher and runner in the brokerage industry. In other words, a grunt. I did a lot of research, familiarizing myself with the lingo of the industry, and made cold calls like crazy. I absolutely started in the most unglamorous role you can start in. I’d never know at the time just how valuable that time was.

What qualities do you think successful business leaders and mentors should have? You become a leader only because people choose to follow you. At the end of the day, you can have any title you want behind your name but if people don’t choose to follow you you’re not leading anybody. That is the way I approach everything.

What the biggest risk you have taken in your career? I switched careers from being a broker at a very wellrespected large company to the development world and Mark-Taylor. At the time, it was a major risk personally, because I was leaving something that I was starting to see a lot of success doing and a place I was really happy, with very respected brokerage partners. I thought I was going to be a broker for the rest of my life and I treated it that way. As is usually the case, the opportunity at Mark-Taylor hit me at a time when I certainly wasn’t expecting it. It was the brokers I worked with that gave me the perspective to understand what this opportunity meant. In retrospect, there is zero question that this has been the right move for me and something I see doing for the rest of my life.

What advice would you give to a college graduate wanting to work in the real estate industry? The advice I would have above all else to new college graduates: salary should be the furthest thing from your mind and your entire focus should be on finding a company where they are willing to teach you. You’re going to meet a lot of people in this industry that are constantly sniffing around looking to move companies. I would think that attitude is a pretty big turn-off to executives. Whatever you decide to do, whether you see it as a long-term career or a short-term job, act like you’re going to do it for the rest of your life. That passion and preparation is going to be palpable and is going to bring opportunities your way that you would never find if you were out there trying to seek opportunities on your own.

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Interim president, GPEC Camacho manages the domestic and international strategies to entice new industries into Arizona. He is responsible for facilitating the relocation and expansion of more than 70 companies to the Greater Phoenix Area. Desk decor: Camacho has traveled the world and said the most interesting things on his desk are the Baoding balls (Chinese meditation balls) from his latest visit to China.

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ANN ATKINSON, 29

Director of acquisitions, Healthcare Trust

of America, Inc. Atkinson is an essential player in executing HTA’s national growth strategy concentrated on medical office properties and has assisted in more than $655 million of investment real estate transactions as a broker in Arizona. Professional advice: “My generation is filled with ambition and problem solvers. I suggest utilizing those fantastic attributes to try to see things from other people’s perspectives.”

DAN CLEVENGER, 35

Associate architect, AIA, LEED BD+C, Westlake Reed Leskosky Clevenger supervises architectural teams through phases of design and construction and directs the coordination among consultants for projects valued up to $50 million. “At the broadest level, I want to continue giving form to spaces that make the world a better place to live. I believe this includes inspiring others to aspire to similar goals.”

RUSTY KENNEDY, 32

Senior associate, CBRE Kennedy has worked at CBRE since 2007 and focuses his practice on industrial landlord and tenant representation. In 2013, his team leased 1,448,267 SF of industrial/flex space in 54 transactions; sold 3,790,224 SF of industrial/flex space in 15 transactions and 237.17 acres of industrial land (10,331,125.2 SF) in five transactions. Influential mentors: “[My parents] instilled a strong work ethic in me, a passion for the community and a desire to make a positive impact in the things that I am involved in.”

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Predictable Outcomes. G I B Z A

www.LaytonConstruction.com

next DESIGN Generation

Painting the Town By ALISA STONE

eing one of the founders of a top interior design firm in the Valley hasn’t phased 32-year interior designer Christina Johnson. “It’s not a lot of ‘I’; it’s a lot of ‘we,’” Johnson says of the awardwinning team that makes up the San Francisco- and Phoenix-based interior design firm Private Label International. The firm focuses on hospitality and real estate design, however there is a key aspect that sets it apart from the rest, says Johnson. “Most of our competitors are traditional interior design firms. Whereas we get involved a lot with the brand development and our scope is a little different. We do a lot of exterior work...and consulting when it comes to landscape and branding and logos and marketing and PR, so we end up looking at kind of the full spectrum of the project,” Johnson says. Johnson’s core role leans toward research, visioning and positioning of the business, creative direction and anything that has to do with graphics and drawing.

“We work a lot like a creative studio,” Johnson says. Private Label International may still be a relatively young firm at eight years old, but you wouldn’t be able to tell from looking at its award-winning and buzz-worthy projects, locally and out-of-state. To list a few: Calhoun Beach Club in Minneapolis, Minn., Preserve at Marin in San Francisco; The Herb Box in Scottsdale; and the seven stunning and vibrantly painted Cabana properties, developed by Deco Communities. With six apartment properties located throughout the Valley and one property in Vegas, the project is a

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CHRISTINA JOHNSON, 32 Partner Private Label International

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personal favorite of Johnson, and not just because two of them won awards. “Locally, we did all of the Cabana properties, which have also been recognized here in the Valley as the Top 10 apartment complexes to work in. They’ve also started a trend, locally, of bringing in more exterior colors,” Johnson said. Regardless of the project, Johnson is not only focused on what is going to appeal to the client, but also what the design symbolizes. “When we work on a project, obviously we want it to look good and we want it to have a specific look, a specific style but the story is what’s important to us. What we’re giving back to the community is important to us,” Johnson says. With an expansive portfolio and years of experience, Johnson has learned the one thing that is the most important when it comes to interior design. “It’s about the demographic that were targeting. So, while I have a personal style that rarely transcends into my interior design work because the way we approach it is we first research the demographic. What market are we trying to target, and what are their likes and dislikes? Is it traditional? Is it modern? What’s going to appeal to them?” Johnson says.

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“I’ve done projects all across the board. I’ve done historic properties; I’ve done super modern properties,” Johnson says.

PHOTO BY SHAVON ROSE/AZ BIG MEDIA

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CAMERON CARTER, 38

Partner, co-chair of transactional department, Rose Law Group Prior to attending law school, Carter was a project manager for Jokake Construction. Now he specializes in development, land use and zoning law. Strangest job: Truck jobber selling wholesale aquatic products. Offbeat desk decor: A super-soaker squirt gun. The firm holds a game of squirt-gun assassin among employees each year, and it gets pretty competitive.

Eleanor Hayzlett, 36

CEO, National Sign Plazas Hayzlett helps municipalities across the country develop unique signage and methods for civic branding and economic development campaigns. Proudest achievement: Opening three offices in Texas after I took over the business from my father.

Melissa Holm, 36

Design director, senior associate, Gensler Holm has won 11 design awards in the last three years and is an active IIDA member and student mentor. Proudest achievement: I am constantly amazed I get to have influence in the creation of built spaces enjoyed by so many people.

Will Strong, 30

Vice president of Industrial Services Group, Cassidy Turley Strong, an industrial landlord and tenant specialist, and has been involved in the lease and sale of more than 21MSF valued in excess of $800M. First job: Selling peaches from a red wagon at 3 years old Professional mantra: “The Man in the Arena” by Theodore Roosevelt

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COMPANIES TO WATCH

40 Companies to Watch in 2015 Every year, AZRE magazine reflects on the leading companies throughout the industry and spotlights those that have achieved greatness and will continue to do so over the next 12 months. AECOM: In July 2014, AECOM acquired Hunt Construction Group, making AECOM a top U.S. builder of sports venues, airports and healthcare facilities. AECOM also acquired $10B industry peer URS. The combined entities will have more than 95,000 employees in 150 countries and a calendar year 2013 pro forma revenues of $20 billion. Hunt with PENTA Building Group will construct the $400M Tohono O’odham Nation’s West Valley Resort and casino in Glendale. Arizona State University: With the largest college enrollment in the country, ASU is constantly developing, renovating or expanding its facilities, not to mention educating the future workforce of Arizona, which plays an integral role in the state’s economic development. Large upcoming projects include the Sun Devil Stadium renovations and student center expansion and the Athletic Facilities District.

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Butler Design Group: Designing offices all over the Valley, Butler Design Group’s projects in the pipeline include Rivulon, the $750M mixed-use development in Gilbert, Reserve at San Tan, Park Lucero, Mach One, Tolleson Corporate Park and Westech.

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Catellus Development Corporation: After two years of vetting candidates, ASU selected Catellus as the master developer for its Athletic Facilities District, a 330-acre mixed-use development at the northeast end of the Tempe campus. Public planning and permitting will take the next nine months and development will potentially stretch over the next 10 to 20 years.

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Banner Health: Banner Health announced that it will acquire the University of Arizona Health Network in 2015. This includes UA’s two hospitals, 6,300 employees, health plan and medical group. This makes Banner Health the second-largest employer in the state and will affect future medical and biomedical development.

Baum Development: Baum Development was selected by Tempe city staff to redevelop a five-acre lot featuring the former Hayden Flour Mill into a mixed-use project that includes an outdoor theater, boutique hotel and dining options.

Below: DPR/Biosciences Partnership Building

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CBRE: In November, CBRE managed the transaction for the largest office investment sale, per square foot, in Metro Phoenix’s history with the Freeport-McMoRan Center in downtown Phoenix that went for $110M, or $442 PSF. In July, CBRE brokered Alliance Residential’s 270-unit Broadstone Camelback apartments for $277,000 per unit to Heitman America Real Estate Trust. This is the highest per-unit price ever paid for a conventional apartment complex in the Valley. CMC Commercial Metals: CMC Commercial Metals is turning 100 this year. Its Arizona location includes a steel mill in Mesa, Ariz., that is doing innovative things in steel processes. Projects include Marina Heights, 98 percent of the metal for which is recycled. CMC has also been commissioned for the Tesla battery factory in Reno, Nevada. Colliers International: Colliers’ Cooke Multifamily Team brokered a 2,759-unit multifamily portfolio sale for $168.5M. It’s the largest, to date, multifamily portfolio closed in Metro Phoenix. Cushman & Wakefield of Arizona: In October, the brokerage firm announced the launch of its TechBeat, a website that serves as a tool for technology startups or creative companies to find reports and trends in Metro Phoenix’s real estate market.

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Clockwise from left: Habitat Metro/Portland on the Park, Arizona State University/Sun Devil Stadium renovations, Hines/ Chandler Viridian

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The DAVIS Experience: DAVIS has put its design touches on some of the biggest office and multifamily projects coming online and more than 75MSF in the Metro Phoenix area alone. From Hayden Ferry Lakeside to Marina Heights and Portland on the Park, Waypoint (adjacent to the 250-acre Mesa Riverview property).

Deco Communities: From its skyline-changing luxury condos in Old Town Scottsdale (Envy Condominiums) to its redevelopment of a condo community in downtown Phoenix (Edison Midtown), Deco is giving a pulse to the surging condo movement in the Valley. It also opened it sixth Cabana Modern Apartment community in Arizona.

DPR Construction: As one of the guiding hands in downtown Phoenix’s biomedical campus in downtown Phoenix, DPR’s role (in a joint venture with Sundt) is to bring the 10-story, 245KSF Biosciences Partnership Building to fruition. The two-year construction of the $136M development began in late 2014. DTZ Group: In September, DTZ Investment Holdings announced it and brokerage Cassidy Turley entered an agreement to sell 100 percent of the equity interests in Cassidy Turley. The acquisition’s close date was scheduled for Dec. 31, 2014. Gould Evans: Locally owned Gould Evans was awarded the design job for ASU’s $162M Sun Devil Stadium renovations alongside HNTB Corporation. Construction will begin in early 2015.

GPE Commercial Advisors: Medical listings are the game at this firm, which announced it would have exclusive market listings for the 43-acre mixed-use 90th Street Medical Campus and the 47KSF Mahoney Professional Building, set for completion in September.

Hines: After two years of legal complications regarding the former Elevation Chandler site in Chandler, Ariz., Hines purchased the 20.5-acre site for a $150M mixeduse project named Chandler Viridian that will include multifamily, hotel, office and retail.

Green Ideas Sustainability Consultants: In October, Green Ideas became one of the first companies in the world to achieve LEED Proven Provider status from the Green Building Certification Institute. Its project portfolio includes Intel’s CH-8 R&D facility and the Arizona Game & Fish Department Headquarters.

Jones Studio: From transforming an old Harkins Theatre location into a performing arts center and instructional and practice space for Mesa Community College to the $213M, 216KSF redevelopment of the Mariposa Port of Land Entry, Jones Studio brings an imagination and character to existing projects that is as much a signature as it is a responsibility.

Habitat Metro: The company that brought the 245-unit Portland Place Condominiums to Margaret T. Hand Park announced Portland on the Park, a $75M, 170-loft and condo development, in May. It’s expected for completion mid-2016. Hayden House Tempe, LLC: The three-way development partnership of Hensel Phelps, Douglas Wilson Companies and Karlin Real Estate known as Hayden House Tempe LLC, announced plans for a $200M mixed-used development, Mill and Rio Salado, in Tempe on the historic “Monti’s property” at Mill Avenue and Rio Salado Parkway.

Keyser: 2014 was a big year for Jonathan Keyser’s tenant representation firm. After merging with three companies last year, including the $120M Chermack Consulting Group, McMillan Commercial Real Estate and Catalyst Commercial, Keyser has expanded its property management division. Layton Construction: Layton’s Arizona revenues were near $150M from a range of project types including healthcare, hospitality, corporate, public works and tenant improvement in 2014. Layton enters 2015 with a backlog that includes the $110M PhoenixMart project in Casa Grande.

Healthcare Trust of America: The Scottsdale-based REIT in November priced an 8 million share offering of its common stock at $12.55 a share, raising $100M. It also is in the process of selling non-core assets, including a few in Sun City. HTA owns 30 medical offices in Greater Phoenix. 31

COMPANIES TO WATCH

above: Ryan Companies US, Inc. /Amkor Corporate Headquarters, right: Richard + Bauer/Science and Health Building at NAU Lennar Multifamily Communities: Lennar, a wellknown homebuilder, purchased a 5.46-acre site on the NWC of Central Avenue and McDowell Road in downtown Phoenix zoned for multifamily development. It will be Lennar’s first commercial project in downtown Phoenix and second apartment complex in Arizona (Skywater at Town Lake in Tempe). Nationwide Realty Investors: The $750M Rivulon project in Gilbert celebrated its first phase of development at the end of 2014. The 250-acre mixed-use development will include 3MSF of class-A office space and 500KSF Isagenix headquarters.

The Opus Group: In March, Minneapolis-based The Opus Group announced it would open an office in Phoenix, to be managed by 26-year industry veteran Larry Pobuda. Opus Group is has two sites under contract, as of December, including the Sundt-owned University Square in Tempe, on which Opus is proposing a luxury mixed-use development that would prospectively break ground midsummer, and a 130KSF office continuation of Pima Center with a prospective early summer groundbreaking.

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NorthMarq Capital: NorthMarq reportedly closed in excess of $12B of loans in 2014.

P.B. Bell Companies: In addition to buying 2,759 apartment units for $168.5M in July, P.B. Bell was selected, in a joint venture with Davis Enterprises, to redevelop Barrister Place, featured in Alfred Hitchcock’s “Psycho,” and two adjacent parcels in downtown Phoenix into a mixed-use community. Richard + Bauer: Two noteworthy projects will wrap up construction in May 2015 — the Science and Health Building at NAU and phase 2 of the Environmental and Natural Resources (ENR2) building at UA. They both include 120KSF of labs, lecture halls and offices. The latter’s design draws inspiration from a slot canyon.

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Ryan Companies US, Inc.: GoDaddy’s Global Technology Center, a playground masquerading as an office space, is one of Ryan Companies’ recently completed office projects. The company was also the contractor for a 437KSF showroom and distribution center for Living Spaces Furniture. This January, Ryan Companies completed the 102KSF Amkor Corporate Headquarters and progress continues on Marina Heights, the largest office development in Arizona. SmithGroupJJR: In addition to designing many healthcare, higher ed and science and technology projects this year, SmithGroupJJR won 22 awards, nationally and internationally. It was also involved in projects that situated or expanded economic engines to Arizona, including Chandler Innovation Center, Mobile Mini, Aspect Software, GoDaddy Technology Center (interiors only).

STORE Capital: STORE Capital Corporation, an internally managed net-lease real estate investment trust (REIT) that invests in Single Tenant Operational Real Estate (STORE), announced in November the pricing of its initial public offering of 27,500,000 shares of its common stock. After deducting underwriting discounts and commissions and estimated offering expenses, net proceeds are expected to be approximately $473.7 million, or $545.5 million if the underwriters fully exercise their option to purchase additional shares. Sunbelt Holdings: There is many a master plan synonymous with Sunbelt Holdings. Marina Heights, Vistancia and Hayden Ferry Lakeside, to name a few. Next year, expect to hear more about all of those, plus the Palm Valley 303, PV|303, business park.

Sundt Construction: This Scottsdale-based company has been awarded many in- and out-of-state military renovations and developments. Additionally, Sundt completed the multi-million-dollar Coyote Center at Chandler-Gilbert Community College. It was selected to renovate Sun Devil Stadium next year.

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Trammell Crow Company: In partnership with Artis REIT, Trammell Crow will finish the $46M, 631KSF Park Lucero in 2015. The class-A industrial development features six buildings. Trammell Crow will also continue bring Coldwater Depot Logistics Center, Mach One and Spectrum Ridge developments online in 2015.

Venue Projects: Kitchell-Perez: Venue Projects’ John Kitchell and Lorenzo Perez are perhaps best known for their recent redevelopment of the former Beef Eaters restaurant into a Changing Hands bookstore, restaurant and community hub called The Newton. Vintage Partners: It was announced in 2014 that Vintage Partners, with Kitchell and Nelsen Partners, will redevelop the 1950s, 120KSF shopping center Uptown Plaza on Central Avenue. The urban infill project will stay true to the original mid-century modern design in hopes of replenishing the appeal of the center in its heyday. Wentworth Property Company: Wentworth Property Company with Clarion Partners is building one of the largest speculative industrial projects in the Valley. The class-A Airport I-10 Business Park’s first phase clocks in at 604,658 SF. The company is also working on a 200KSF build-to-suit for Shutterfly at the 136-acre Discovery Business Campus. Wespac Construction: Wespac is the general contractor for Wentworth Property Company/Clarion Partners’ class-A Airport I-10 Business Park, one of the largest speculative industrial projects in the pipeline with Phase 1 at 604,658 SF. Wespac is also the general contractor on Liberty Property Trust’s potentially 11-building Liberty Center at Rio Salado mixed use business park.

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REAL ESTATE OUTLOOK THE

2015 OUTLOOK

Ready, set...go or no?

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he recovery has thrown down the gauntlet. There are billions of dollars in capital looking to be invested in commercial real estate, and housing researchers are pointing to a potential rise in firsttime homebuyers with the dropping 3 percent downpayment mortgage rate offered by the FHA. The race is on. Texas, California and Colorado are currently leading the pack with six of the Top 10 U.S. markets to watch, according to Urban Land Institute’s “Emerging Trends in Real Estate 2015” report released in December. Phoenix clocked in at No. 26. With vacancies weighing down a handful of submarkets in the Phoenix Metro area, the region may come across a little out of shape. Newmark Grubb Knight Frank managing director Pete Bolton notes Texas and California has business development funds that utterly dwarf Arizona’s. But, there’s also the issue of pacing. Economists are reporting Arizona about 35 percent behind the country, overall, in reclaiming its pre-recession job levels. Elliott D. Pollack, CEO of his eponymous economic consulting firm, believes the Valley won’t see any significant office construction – except in select submarkets like Tempe – until at least 2017, according to his points at the 51st annual Economic Forecast Luncheon, co-sponsored by Arizona

State University’s W. P. Carey School of Business and JPMorgan Chase. This has kept Sunbelt Holdings President John Graham cautious. Graham says he will continue to develop with restraint until he sees an improvement of higher-wage employment and an uptick in housing, which may be on the horizon as a quarter of buyers locked out by former foreclosures or short-selling their homes qualify to re-enter the market. The key until then is to not overcommit while anticipating the recovery, he says. It’s ready, set, wait. This is how AZRE’s interview begins with Marty Hedlund, senior vice president and Southwest district manager at Sundt Construction. There are “lots of medium-sized ideas, not many triggers pulled,” he says. Some of the reason the industry may be shooting blanks is banks’ required equity levels are “not conducive to development,” Hedlund says. “Alternate sources of funding like REITs or nontraditional investment funds can only fill so much need,” Hedlund says. These obstacles will linger for a year or longer, he says, adding, “Corporate capital investment — in their own real estate needs — will likely help us get out of this office doldrums, and projects ‘on the drawing board’ at this point appear promising.” Sundt construction broke ground on the $125M Wells Fargo Chandler Campus expansion (technically,

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doubling its size) last January, with construction on the 410KSF campus expected to wrap up this summer. Ryan Companies US, Inc., which is co-developing the largest office development in Arizona with Sunbelt Holdings, Marina Heights, for insurance company State Farm’s new campus, agrees with matching the slow and steady pace of the market. “I believe ‘slow and steady wins the race,’” says Molly Ryan Carson, vice president of development for Ryan Companies. By now, she says, the industry understands the peaks and valleys of the Arizona market are more frequent than in other states. It’s about pacing. “A great deal of our work nationally in 2015 is single-tenant office development and construction,” Carson adds. “The office market, although

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not booming by any stretch, a steady requirement continues.” Cautious developers, she says, will consider • Sticking to the fundamentals • Increased multi-state competition for office and industrial company attraction • Increase in the cost of finance • Adequate skilled construction and engineering work base The latter point has become a concern as construction job growth dwindles in Arizona. The state lost 2,400 construction jobs between October 2013 and October 2014, according to the Associated General Contractors. “Though it has not slowed our development and I do not foresee it doing so, it is something we have national efforts working on,” Carson

ZACK AULICK

DAVE CHEATHAM

Andrew Cheney

Marty Hedlund

Craig Henig

Tim Thielke

Philip Weddle

Nicholas Wilson

REAL ESTATE OUTLOOK says. “Partnering with top universities and construction organizations that are working to grow interest and participation in construction and engineering fields is something we’ve always done, [but] it is needed now more than ever.” Craig Henig, senior managing director and market leader at CBRE, says Arizona’s pace is actually going to work to the state’s advantage. “For commercial real estate investment purposes, the fact that the employment recovery in the local market has lagged behind the national recovery is a positive because it means that Phoenix has a longer runway compared with markets whose economic recoveries took form earlier,” he says.

Infilling the holes

Through the downturn, the various sectors of the industry began communicating more, says Tim Thielke, LEED AP at PHArchitecture. “The RFPs have gotten better in more accurately describing not only what the clients needs but also what they want. Some of the earlier RFPs we were getting really seemed to be written in a way that encouraged teams to respond with a solution based solely on pricing and some minimal user requirements. I think there’s been a lot of communication between developers,

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The Scheduling Institute will soon give new purpose to a vacant bar and restaurant space. Courtesy PHArchitecture

architects and brokers and the result has been an evolution of the process that provides a more comprehensive look at the identity of the user. This adaptation allows for responses that are directed more toward current and future trends in the office environment like additional flexibility, newer technologies, open environments, collaborative spaces and also providing an image of their company to attract the right type of workforce.” This has kept the architectural firms busy with addressing the Generation X effect on office, leading to a more flexible working lifestyle being reflected in office development and

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redevelopment of obsolete spaces. “As the way work is done changes, employers are wanting to create environments that can evolve with their workforce.” PHArchitecture’s new office space reflects such changes with exposed ceilings, open as well as private workspaces and a break room kitchen equipped with a beer tap (though it’s not always in use). Prior to the downturn, Thielke says, PHArchitecture’s workload didn’t include of a lot of infill or adaptive reuse and renovation projects. One such project, he says, is The Scheduling Institute, a vacant bar and restaurant

CRANE’S EYE VIEW

John Graham President, Sunbelt Holdings Major projects: Marina Heights, Portland on the Park, PV|303 and management of ASU Research Park Industry prediction: Commercial and residential markets will see improvement in latter half of 2015 Open for discussion: I said this a couple years ago, but I think we should continue to focus on the quality of infrastructure, long-lead items, such as water and sewer but also roadways and telecommunications. At some point, we’re going to burn through what we built. One of [Arizona’s] greatest strengths has been the high quality of infrastructure. Mood: Cautiously optimistic

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Molly Ryan Carson Vice president of development, Ryan Companies US, Inc. Major projects: Marina Heights, Amkor Corporate Headquarters, ASU Research Park, Hayden Ferry Lakeside, others not ready for publication Industry prediction: Steady improvement in the Southwest market’s commercial development and construction, without a boom or bust, and significant absorption in the industrial sector and continued apartment growth Open for discussion: Nationally, the future of retail and industrial distribution logistics further merging; Statewide, the continuance of our state’s great efforts in attracting new businesses

Brian Ellis President and COO, Nationwide Realty Investors Major projects (in Arizona): Rivulon, renovations of Gainey Ranch Corporate Center Industry prediction: I believe the Phoenix market is going to do what it has demonstrated in the past which is rapid growth. I think the next few years it will be time for growth in all sectors. We’ve been invested in the Phoenix market for more than 25 years and the next few [years] will be strong. Mood: I feel very optimistic. We had a good year and a lot of activity in 2014 and solid improvement over the last year and [are] expecting that trend to continue…in the Phoenix market, Southeast Valley and Gilbert.

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REAL ESTATE OUTLOOK located at the southwest corner of Third and Jackson streets in downtown Phoenix. It’s being transformed into a training facility for dentists. “While we are seeing less activity as opportunities have become less attractive due to the rising costs of existing properties, we still believe this type of work will be ongoing for several years and continue to bring obsolete product up to current market standards,” Thielke says. Philip Weddle, FAIA and principal at WEDDLE GILMORE black rock studio, notes more public-private partnership (P3) projects than he remembers in years past. “Public-private partnerships certainly aren’t new, but as public agencies continue to struggle with tight budgets, we’ve seen this type of partnership as the way to get things done,” says Weddle, whose studio is involved in a “handful” of larger public projects. “It does seem like there has been an increase in the number of public RFQs, however, some of them only have funding for design phase services and do not have construction funding secured at this time. For public work to return to pre-recession levels will require the continued improvement of the regional economy to the point where more public entities can successfully pass bond issues for capital improvement projects.” Sunbelt Holdings’ Graham agrees — there’s a lot of talk, but no action on P3 projects. Tempe — hottest submarket in the Metro — however, announced a notable P3 project that will move forward in 2015 — Arizona State University’s 300-acre University Athletic Facilities District. Tempe is seeing millions of square feet of new development as well as its share of infill, from The Yard in Farmer’s Arts District to Postino at The Annex. “A healthy community should have both,” says Mayor Mark Mitchell. “[Adaptive reuse] is an increasingly popular option that reflects the progressive, innovative, funky, sustainable character for which Tempe is known.” The mayor’s top priority, he says, is to move forward with the longstanding vision of a hotel-conference center. The city is already en route with the USA Place plans, and two recently announced historic preservation

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A lot of economists are pointing at 2017 as a full recovery year. How will 2015 compare to last year? We feel optimistic about 2015. The last six months of 2014 have seen a big increase in our pipeline of companies interested in Tucson, and we have had several major announcements with more coming in the first quarter of 2015. We are tracking ahead of our goals for TREO’s fiscal year.

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How is Tucson looking next to comparable metropolitan areas? In our targeted industry focus on aerospace and defense, transportation and logistics, and bioscience/diagnostics – we are doing well. We have the fifth highest concentration of A&D workers in the country and that attracts other companies to the talent base we have. The state and local infrastructure plans for the future (I-11, Sonoran Parkway and the Aerospace, Defense & Technology Research Park) are generating buzz among companies in these targeted industries, as the right priorities for the future. Our diagnostics sector is still emerging but gaining strength and recognition with the presence of Roche, Sanofi and other growing bio start-ups.

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— Laura Shaw, senior vice president, Tucson Regional Economic Opportunities, Inc.

projects. The Hayden Flour Mill on Mill Avenue and Rio Salado Parkway will be redeveloped by Baum Development, Sundt Construction and SmithGroupJJR into a boutique hotel and outdoor amphitheater. Across the street, the parcel of land that includes the old Hayden House and Monti’s La Casa Vieja will transform into class-A office, a Kimpton hotel and retail/dining. According to Nicholas Wilson, managing director at Douglas Wilson Companies, one of three developers of Hayden House Tempe LLC that will handle the Mill & Rio Salado project, his company has been eyeing the project for nearly a decade. Many

Douglas Wilson Companies’ projects have a historic element to them, but Wilson says it really came down to Tempe being a true urban core the Valley didn’t seem to have at the time. “We love quality, good projects. We saw Tempe could use one,” says Wilson, who says he has spent nearly every week of the last two years in the city. “I feel pretty confident in what Tempe is,” he says. “ It has a lot of charm and character and a good base of building blocks for being vibrant for Millennials. It has all those items people are attracted to.” As for the project’s new neighbors across the street — Wilson says he thinks they balance out and may have

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The 250-acre Rivulon project consists of a 150KSF class-A office build-to-suit for Isagenix in its $70M first phase.

more to reveal in coming months about that topic. “At the end of the day, business development is a hugely important catalyst for establishing quality of life in a community, but it’s not the only thing,” says Mitchell. “We want to keep improving as a well-rounded place to be – one that is diverse, has great public spaces, reliable transportation, enriching arts experiences, terrific schools and so much more.” It sounds a lot like the sentiments of Brian Ellis, president and COO at Nationwide Realty Investors, who is developing the $750M mixed-use Rivulon project (that’s also a P3) in Gilbert. “I didn’t know Gilbert was the hay capital of Arizona,” he says. “I saw it as the fastest-growing community in the country...The city leaders wanted to increase their in-town employment and build an area where there were lots of high-paying jobs in Gilbert.” The 250-acre project consists of a

150KSF class-A office build-to-suit for Isagenix and spec office as well as some retail in its $70M first phase. The built-to-suits are a big deal, says NGKF’s Bolton. “There are still billions of dollars out there looking for assets to purchase in real estate. It’s still a hot commodity. You can’t buy an industrial building in Phoenix, and if one goes online that is 80 percent leased, everyone will be all over that.” How will Arizona get out of this hole? “One shovel at a time,” Bolton says. “I mean that. That’s what we’re doing.”

Upswing and a miss

Phoenix’s office market saw some notable success in 2014, according to Arizona brokerage experts. Some markets in Phoenix Metro broke through the 20 percent office vacancy ceiling in 2014, propelling it among the Top 10 markets in demand of office space, says Cassidy Turley Director of Research Zach Aulick. The

market’s office sector saw 2.5MSF of net absorption, adds Lee & Associates Principal Andrew Cheney. This is the area’s 25-year average, he notes, but it’s still an optimistic blip in recent years. This was the first year, Aulick says, that the Valley had multiple speculative projects announced to start construction. SkySong 3 was also 95 percent pre-leased in August 2014 — another notable achievement Cheney mentions. “Pre-leasing in Phoenix is incredibly difficult and is a testament to [SkySong] and the improving market. This improved leasing activity has increased leasing rates in select submarkets and helped drive sales activity across the Valley, particularly in class-A properties,” he says, adding that pre-leasing will still be an obstacle in 2015. “Signing a 10-year lease for a new property will be a challenge for businesses that are constantly changing due to technology and growth projections.” January-February 2015 | 41

REAL ESTATE OUTLOOK Class-A properties are difficult to find and sell, Cheney says, as buyers will continue to compete for core properties. The industrial market — the other hot sector for leasing in 2014 — continued to see more small- and mid-sized users looking for 10KSF to 150KSF, Aulick says. “What is most surprising is that the increase in industrial leasing velocity has taken place without a big push by the housing market, which in the past has greatly influenced the demand for industrial space,” Aulick says. When it came to sales, “Metropolitan Phoenix was on nearly every investor’s radar screen in 2014 with robust investment sales occurring for every product type,” says Aulick. “Buyers view the Valley as a great value compared with global gateway markets. Buyers who purchased assets in other markets that rebounded quicker are now trading out of those areas and looking to Metro Phoenix as their next target market. The Valley has not reached peak pricing set in 2007. There is still a lot of upside for Metro Phoenix real estate values as both pricing and rents increase.” Another factor to consider, says Dave Cheatham, president, Velocity Retail Group, LLC, is that home building, one of Arizona’s main industries is on the sidelines and is still not back to prerecession levels. “It is encouraging to note that the Arizona economy is still creating new jobs, and is in the top in the U.S. even without home building as a driver for jobs. The best is in front of us for 2015 and 2016 as the Phoenix area will continue to grow stronger in all areas of the economy,” he says. CBRE’s Henig notes that employment change in Phoenix is forecasted at 2.9 percent. “Overall, Arizona is growing, both from a GDP standpoint and a population standpoint, which is something that a lot of states cannot say,” Henig says. “ASU is driving Phoenix’s future as knowledge-based employers are attracted to the large supply of talent that is coming out of the university.” With brains, brawn and an easyto-follow gait, Arizona may just win this race if it can keep the momentum through 2017.

BROKERAGE OUTLOOK: WHAT’S THE DEAL? INDUSTRIAL “Though the trend of large industrial users opting for build-to-suit over existing space may continue, Phoenix’s small- to mid-size tenants are ready, willing and able to fill the absorption gap. In the past 12 months, users taking down up to 100KSF drove the market, often committing to new construction before it was completed. We expect more of the same in 2015, as a result creating a more balanced market and a definite uptick in absorption and rental rates. All of Greater Phoenix will benefit from this activity, particularly the strongperforming Airport and Southeast Valley submarkets, where insiders are not at all worried about the 2.2MSF of spec industrial space scheduled to deliver in the next 12 months.” — Steve Larsen, vice president of industrial/supply chain & logistics solutions group, JLL

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clinics in highly visible, easily accessible residential communities to provide primary care, and to create a wellness environment for their patients. 4. Branding and visibility will continue to be important to healthcare practices and they will continue to lease space in retail projects that provide these opportunities; they will be located in proximity to the populations they serve and they will be focused on a consumercentric experience for optimum patient satisfaction. — Julie Johnson, CCIM, Executive vice president, GPE

“You really can’t look at the market as a whole anymore. [The overall 23 percent market vacancy] is a misnomer; There are some submarkets doing a lot better (and worse)…The good news is the architects, engineers and contractors are staying busy with the build-to-suits. We’ll see more of those. It doesn’t do much for brokerage…the place to focus is business expansion.” — Pete Bolton, Executive vice president and managing director, Newmark Grubb Knight Frank

MEDICAL OFFICE There are four major trends to look out for in 2015: 1. More physicians to become employed by hospitals or other corporate healthcare networks due to the increase in the costs of running a medical office while physician’s insurance reimbursements are decreasing. They will move out of their medical office suite and into hospital owned or leased clinics. 2. Larger suites to be leased by healthcare practices. The former norm of doctor’s office sizes of 1,500 to 2,500 SF is changing to 5KSF 15KSF to accommodate larger practices/clinics, with few smaller practices to replace them. 3. Hospitals and other corporate healthcare networks will continue to build new large health centers and outpatient

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MULTIFAMILY

“Greater Phoenix will see 155 to 120 transactions (in the 100+ unit market) in 2014. In 2013, it was 103. From a total volume standpoint, the metro area was $2.35B and will be close to $2.5B. It’s up 6 percent in total dollar value. We saw more trade in 2014 of B and C product. The first half (of 2015) will be similar to 2014 but the second half will have more merchant build (immediately reselling) recorded than we have seen before…The trend we’re watching is second-generation asset sales next year. From January 2010 to 2015, 51 percent of overall stock were traded.” —Cliff David, Vice president of investments, Marcus & Millichap

RETAIL “Each quarter during 2014, the Phoenix area vacancy rates have shown a clear path to becoming healthier, which is evidenced by the majority of our regional areas working down into the single digits. What I think is even more interesting, is that our vacancy is improving despite a glut of more than 250 vacant big boxes, and without a healthy lending environment for small business. Looking forward, as banking starts to allow more lending to the smaller entrepreneurs, which will allow mom and pop business owners to lease retail space, we are going to see more rapidly declining vacancy rates.”

— Dave Cheatham, president, Velocity Retail Group, LLC

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n 2013, NorthMarq Capital arranged $10.1B in loans. In 2014, that number rose 20 percent to $12.6B, reports Managing Director James DuMars. That doesn’t mean the market isn’t competitive, notes DuMars, who locked in a low-leverage $25M loan at 3.64 percent for 10 years. He is also financing a $56M class-A shopping center purchase at a rate around 4 percent with full-term interest only and 75 percent loan-topurchase price. “Lenders are seeking good, quality real estate with quality sponsors,” says DuMars. “They will get aggressive on rate and terms to win the business. I doubt any lender would say 2015 will be any less competitive than 2014 has been.” A good buy exists, but is hard to find, says BH Properties Chief of Acquisitions Andrew Van Tuyle. “I’m very curious to see the business plan that buyers have when buying some of these apartment deals at record numbers and incorporating gimmicks into their debt like high leverage and long-term interest only,” he says. BH Properties pays cash for its assets, which he calls an advantage as it is not reliant on debt markets and timing, and wants to leverage more than $100M in acquisitions in 2015. CMBS lenders are on track to originate $100B, notes DuMars. “My banker friends tell me that they are losing many loans in their portfolios to CMBS,” he says. “I expect this to continue in 2015. There is high demand for the paper and delinquency rates are low.” More banks are re-entering the real estate sector, says Alliance Bank of Arizona Executive Vice President Don Garner. “The liquid lending market benefits borrowers and brings about short-term memories as to the last real estate cycle,” adds Garner. “Banks tend to be like lemmings and follow one another, to the extent that often times structure and margins are the No. 1 things that suffer.” The 10-year treasury yield dropped, despite an overwhelming sentiment of rates reaching 4 percent in 2014. Instead,

they’re hovering around 2 percent as of press time. NorthMarq’s DuMars is reluctant to offer a forecast on treasury rate, but suggests the risk-adverse investor refinance. James DuMars “Spread movements Managing director NorthMarq Capital typically adversely correspond to the change in the UST,” says DuMars. “Historically, I’ve seen spreads compress due to competition between lenders. There is room for spreads to compress and there is a lot of competition to get money out. My guess is that spreads may narrow.”

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“Everyone is gearing up. All sectors look good for Phoenix. We have lenders seeking all of the major property types.”

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Andrew Van Tuyle Chief of acquisitions BH Properties

– James DuMars, managing director, NorthMarq Capital

Van Tuyle says lenders are not pricing the appropriate risk into today’s deals. “I believe there is a real refinance risk for many of the loans that are being made because we could see a real rise in interest rates without a correlative inflationary pressure on rents,” he says. “Without amortization or a long-term fixed rate, many of those deals could be difficult to refinance.” In October, DuMars observes, when the 10-year note’s yield plummeted by 1.8 percent (180 basis points), “many lenders retreated to the sidelines.” “Lenders like stable and calm,” says DuMars. “Volatility shakes them up. During these few days, some life companies instituted rate floors and many CMBS lenders refused to quote

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Don Garner Executive vice president Alliance Bank of Arizona

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spreads. As soon as the 10-year stabilized, everything went back to normal.” Alliance’s Garner predicts the Federal Reserve’s tapering of its quantitative easing process (which was announced in late 2013) will lead to an increase in rates. BH Properties’ Van Tuyle agrees. “My instincts say [rates] have to rise, to the point where I think we will see a 3+ percent 10-year Treasury in 2015. This has to be quantified to say that if there is a major market correction in the Dow Jones, there likely will be a flight to bonds, which actually could bring the yield lower in the short term and delay the inevitable, which I believe is an increase in 10-year treasuries to 3.25 percent.” The Phoenix Metro market’s hot spots are predictable with class-A and -B multifamily properties topping Van Tuyle’s list. Industrial is stable, he adds, noting that Phoenix’s retail situation has a unique challenge to overcome. “Retail is still tricky because Phoenix was so overbuilt,” says Van Tuyle. “Often, there are two shopping centers at the same intersection and it is a case of the haves and have nots. Once center will be stabilized at 95 percent occupancy, and the other will have under 30 percent occupancy. Location, access and parking are keys to making a retail deal work, and making sure you’re properly represented in the brokerage community is also critical.” “Everyone is gearing up,” says DuMars. “All sectors look good for Phoenix. We have lenders seeking all of the major property types.” 45

American Institute of Architects

The Right

AnglES

Stunning structures, stellar architects honored at 2014 AIA Arizona gala

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he American Institute of Architects Arizona Design Awards recognize excellence in design, planning and construction of projects located anywhere in the world that are designed by AIA Arizona architects registered and licensed in Arizona. The awards honor the highest standards of design in response to user requirements, site, context, climate and environment. Each entry, regardless of size or classification, is judged individually on the basis of total design merit. Awards are given the categories of honor, merit and citation (in order of importance). The following awards, medals and certificates were presented to AIA Arizona members at the 2014 AIA Arizona Design Awards Gala held Nov. 15 at Hotel Valley Ho.

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DESIGN EXCELLENCE AWARDS Unbuilt Salt River Pima-Maricopa Indian Community Justice Center Owner: SRPMIC, A Federally Recognized Indian Tribe Contractor: Au’ Authum Ki – Kitchell, LLC Architect: Gould Evans

Citation Wayne N. Aspinall Federal Building and U. S. Courthouse Owner: U.S. General Services Administration, Rocky Mountain Region Lead Design Architect: Westlake Reed Leskosky Architect of Record and Design-Build Contractor: The Beck Group

above: Amangiri Resort

Merit College Center Owner: Central Arizona College Contractor: Adolfson & Peterson Construction Architect: Richärd+Bauer Architecture LLC

Merit Heavy Duty Advanced Transportation Technology Building Owner: San Diego Miramar College Architect: Marlene Imirzian & Associates Architects

Merit Vali Homes Infill Prototype House 1.0 Owner: Vali Homes, LLC Contractor: 180 Degrees, Inc Architect: colab studio, llc

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APS Energy Award

The Village at Prescott College Owner: Prescott College Contractor: Hayley Construction, Inc. Architect: WEDDLE GILMORE black rock studio

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SRP Sustainable Building Award

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clockwise from upper left: Brown’s Ranch Trailhead, Mariposa Land Port of Entry, The Village at Prescott College,

Honor

Amangiri Resort Owner: Canyon Equity, Inc. Contractor: Okland Construction Architect: I-10 Studio, LLC (Marwan Al-Sayed Architects, Wendell Burnette Architects, Rick Joy Architects) “The location for the Amangiri Resort is a stunning 1,400-acre playground for the tactile experience of space, light and time. A large horseshoe canyon of 500foot high “entrada sandstone” cliffs with hoodoos, sand dunes and slot canyons opens north toward expansive views of Escalante/Grand Staircase National Park. The 34-room hotel and spa is conceived as a single mass ruin eroded by ancient time and re-inhabited with only the most essential luxuries of contemporary shelter. The “Living Room” of the resort is a public square focused on a jutting rock formation where a large pool of water is captured for quiet relaxation. The guest room wings form two arms that hug a long low rock formation effectively halving the impact of the resort on this fragile and precious landscape. All rooms are configured to harness the most quintessential desert experience — a solitary place with yourself and the land.” — AIA Jury

Honor

Brown’s Ranch Trailhead Owner: City of Scottsdale Contractor: dck worldwide Architect: WEDDLE GILMORE black rock studio “Brown’s Ranch Trailhead is the gateway to the northern region of Scottsdale’s McDowell Sonoran Preserve. The area contains a rich diversity of plant and animal life and topography that has attracted people for thousands of years, including the more recent ranching era. The ranch is named after the Brown family, who established it in the early 1900s and were instrumental in the development of early Scottsdale. Modern-day Scottsdale and Pima roads began as cattle drive trails led by E.O. Brown from the ranch to the downtown stockyards. The trailhead was designed to preserve the historical, archeological and natural legacy of the site, including Brown’s, Cholla and Cone mountains and Cathedral Rock. Protecting open space, existing views, respecting existing desertscape and creating an experience for hikers, bikers and equestrians were guiding principles of the project. It seeks a balance through the use of appropriate materials, water conservation and renewable energy.” — AIA Jury

John M Roll United States Courthouse Owner: City of Yuma Contractor: Sundt Construction Architect: Ehrlich Architects

Architectural Firm of the Year BWS Architects

Associates Award Benjamin Ayers, AIA

Contractor Award Okland Desert Star

Educator Award Robert Miller, AIA

Young Architect Award Lance Enyart, AIA

The 25-Year Award Boyce Thompson Arboretum – Line and Space

The Goodwin Award Faye Gray Recreation Center by Holly Street Studio Mariposa Land Port of Entry by Jones Studio, Inc.

The Chairman’s Award James Rapp, AIA

Arizona Architects Medal Brian Cassidy, AIA jury information online at azbigmedia.com/azre 47

BUILDING OWNERS AND MANAGERS ASSOCIATION

A Night at the TOBY Awards BOMA’s annual The Outstanding Building of the Year (TOBY) awards were presented Nov. 14 at downtown Phoenix’s Renaissance Hotel. The following winners have a chance to compete at a regional level. Last year, the Arizona Game & Fish Department building, managed by Lincoln Property Company, won an international TOBY Award.

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24th at Camelback II 2324 E. Camelback Rd., Phoenix Owned by: 24th an Camelback Phase II, LLC Architect: Pickard Chilton and Kendall/Heaton Associates, Inc. Managed by: Michelle Brown, Hines 24th at Camelback II is the second phase of a mixed-use master development in Phoenix’s Camelback Corridor. The 306,877 SF, 11-story office building has an Energy Star rating of 92.

500KSF to 1MSF Renaissance Square 2 and 40 N. Central Ave., Phoenix Owned by: Hines Architect: Emery Roth & Sons Managed by: Steve Hamel, Hines In 2007, Hines, on behalf of the Hines U.S. Core Office Fund, L.P., acquired Renaissance Square, an iconic 965,508 SF, Class-A, two-building high-rise office complex. The official building of the Arizona Super Bowl Host Committee has an Energy Star rating of 80.

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Making Arizona look better,

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G I OneB building at a time. Z A

At Ghaster Painting that’s just what we do, make our customer’s properties look better

one job after another! With quality workmanship and customer service that is second to none,

we can help make the place where you are a lot nicer too. Call us today for a prompt, free estimate.

For more info go to: www.GhasterPaintinginc.com or call: 602-277-8541

BOMA

SUBURBAN OFFICE PARK, LOW-RISE

San Tan Corporate Center I & II (STCCI & STCCII) consists of two Class-A, three-story office buildings. Both buildings are Energy Star certified with ratings of 91 and 95, respectively

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San Tan Corporate Center I and II 3100 and 3200 W. Ray Rd., Chandler, Ariz. Owned by: Wells REIT II - San Tan Corp. Center Architect: DFD Architectural Managed by: Claudia Gilbert, CBRE

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MEDICAL OFFICE BUILDING

Max at Kierland 16220 N. Scottsdale Rd., Scottsdale, Ariz. Owned by: ARTIS REIT Architect: Keating Khang Architecture Managed by: Maricela Nunez, CBRE

McDowell Mountain Medical 9377 E. Bell Rd., Scottsdale, Ariz. Owned by: WND Architect: Evolution Design Managed by: Robyn Warnica, CBRE

MAX at Kierland is a six-story, Class-A office building located in the Kierland masterplanned community. Developed in 2008, this ±258,312 SF building became the first to be LEED certified in north Scottsdale and has an Energy Star rating of 98.

The recently renovated McDowell Mountain Medical Building is approximately 84,752 SF with three stories of medical office space. McDowell Mountain is Energy Star benchmarked and in the process of confirming requirements to become Energy Star Certified.

SUBURBAN OFFICE PARK, LOW-RISE Gainey Center I 8601 N. Scottsdale Rd., Scottsdale, Ariz. Owned by: Principal Real Estate Investors Architect: Opus West Architects & Engineers Managed by: Katherine Slater, Metro Commercial Properties Gainey Center I is a three-story, Class-A office building with 140,756 SF of rentable space. The building, constructed in 1999 on 5.54 acres, has an Energy Star rating of 87.

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FBI PHOENIX DIVISION

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ONE NORTH CENTRAL

ASSET & PROPERTY MANAGEMENT Clients Include: Institutional, REIT, Governmental, Private

Anna E. Riley, RPA, CSM, LEED Green Associate Regional Director of Management P: 602.322.6400 E: Anna.Riley@RyanCompanies.com RYANCOMPANIES.COM

BOMA

Master of Portfolios Industrial property managers are doing more with less

good property manager is hard to find if JLL’s Mark Stevens has anything to say about it. They must be good with people, accounting and understand the bones of a building. The hands-on approach is one recognized by Traftin Thompson, LEED green associate and real estate manager with CBRE’s Asset Services. “A good manager is always prepared for what may happen in the future,” says Thompson. More sophisticated investors are buying larger portfolios of properties and they have increased reporting clients, which gets pushed down to property management level, adds Stevens. This means more trades and other movement of properties between companies and their preferred management entities. As portfolios grow in size, property managers are faced with a balancing act of being present in more places than before. “During the most recent economic downturn, companies had to adapt and learn to do more with less,” Thompson says. “The result has been that even as the economy continues to improve and we return to ‘business as usual,’ many owners and their management teams have significantly improved efficiencies.

That said, in order to MARK STEVENS provide a reasonable fee structure to our clients, industrial property managers tend to have several buildings in their portfolio.” CBRE, Thompson says, has reacted to this issue by staggering small office buildings and large industrial buildings in the same portfolio so buildings “get the attention they deserve.” “Having managed a 2MSF industrial portfolio in Atlanta prior to moving to Phoenix, I was accustomed to managing large portfolios, so it hasn’t been a difficult transition for me, as my current portfolio is much smaller,” Thompson says. With the delivery of 5.2MSF of space in 2014 and the anticipated delivery of 4.5MSF in the near future, tenant retention will be of paramount concern, says Anna Riley, regional director of management for Ryan Companies. “Managers will need to exert greater efforts to assure tenant satisfaction under the constraints of compressed management fees and the demands of portfolio workloads,” Riley adds. Large industrial developments are breaking ground, despite some high vacancy rates. Southwest Phoenix has a high industrial vacancy of 14.3 percent,

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By Amanda Ventura

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Traftin Thompson

Anna Riley

according to JLL Q3 reports. Gilbert, Tempe and the airport submarkets are all higher than 10 percent vacancy. Portions of these statistics are tied to obsolescence of existing industrial space. “There are only a small percentage of older buildings that are truly obsolete,” says Riley. “Owners of older buildings that no longer satisfy the utility and function of the new industrial user have gotten creative in attracting less-traditional uses and in structuring competitive deals to attract an industrial user that can be accommodated by the old formula. Where possible, owners are also making investments to adapt buildings to meet the evolved need. “As managers, it is our role to provide a well-maintained property with systems that are dependable and efficient at a competitive operating cost. The combined benefit of strong ownership and diligent management is a successful combination regardless of building age.” What should a good property manager be looking for in him or herself? “Learn about what the tenant does in your space and what’s important to them,” says Stevens.

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International Council of Shopping Centers

ICSC:

SURFING THE OMNI-CHANNEL By Amanda Ventura

hen web-based shopping gained popularity over the last two decades, spearheaded by the likes of Amazon and major retailers’ internet storefronts, the imminent demise of brick-and-mortar establishments seemed likely. War was declared between bricks and clicks. The win-lose conversations are fading into the background as researchers suggest a more symbiotic relationship between the two. Stores such as Birchbox, Warby Parker and Bonobos are retailers that began as e-commerce only and are moving into physical storefronts. Amazon.com, which reportedly controls about half of online-only sales in the U.S. (and 5 percent of U.S. retail sales), has also announced plans to open a physical storefront in New York City. “Several national directors of real estate have indicated that zip code specific sales suffer when a proximate brick-and-mortar store is closed,” says Joel Moyes, principal of Kinetic Companies and Arizona and New Mexico state director for the International Council of Shopping Centers (ICSC). No one denies the retail sector, plagued by high vacancy due to abandoned big box spaces waiting for

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alternative uses or to be broken down into smaller storefronts, is one of the hardest hit by the economic downturn. Moreover, it is having to evolve with a changing base of consumers. Despite the pressures of technology, not that much has really changed at the core of retail’s purpose, says

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ON A WEEKLY BASIS, MOBILE USERS ARE:

28% 25% 22% 22%

tracking packages researching products prior to store visit are conducting in-store research seeking store location/checking inventory

1 in 5 consumers make a purchase after opening a retailer’s email on a mobile phone Source: Movable Ink, U.S. Consumer Device Preference Report with a sample size greater than 4,000

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Dave Cheatham, president of Velocity Retail Group, LLC. “Retail is about getting product to a customer,” he says. “Whether the customer comes into the Dave Cheatham store and looks at the product but then purchases it over the internet or whether the customer shops online and then goes into the store to purchase is irrelevant. The bottom line is that the retailer is still selling their product.” According to IDC Retail Insights, omni-channel customers shop three times more frequently and spend 3.5 times as much as single-channel shoppers. A survey of 100 senior executives at leading retailers as reported by the Retail Industry Outlook Report compiled by KPMG LLP reported the biggest revenue driver in the next one to three years is customer retention. Omni-channeling is paving the way for this. One example, Cheatham points out, is a store’s ability to search inventory at all surrounding stores to find and ensure delivery of the product

Commercial Real Estate Advisors

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ICSC EXPRESS LANE WITH JOEL MOYES WHAT ARE THE DETAILS FOR THE 2015 SW IDEA EXCHANGE? It’s March 4 at the Fairmont Scottsdale Princess. Hot topic: Reinventing retail

Joel Moyes

Co-founder and president, Kinetic Companies, New Mexico/Arizona State Director for ICSC

WHAT IS THE TOP CHAPTER GOAL FOR 2015? Grow our new membership through NextGen initiatives while providing relevant, timely industry support to our membership. Our industry trade organization uses the moniker “EARN,” which represents our membership goals to

carried by the company but not at the store within 24 to 48 hours. “This newer offering is better for the customer, who now gets the product they wanted, and the retailer does not lose a sale,” he says. “Additionally, it helps the retailer utilize their inventory more efficiently by pushing product to the customer, rather than sitting in a back room.” This kind of technology, employed by heavy hitters such as Wal-Mart and Target, do require significant technological upgrades. More than half of the senior executives surveyed said investing in technological updates, which include company website, brickand-mortar stores and social media, then mobile, in that order, were a high priority. However, about that same number of executives cited cost as a hindrance in technological upgrades. According to a January 2014 report by Business Insider, the number of smartphone users using mobile coupons was estimated to reach 47.1M last year — this equates to about 41 percent of department store customers. Mobile payments are a focus of about 40 percent of the KPMG surveyed retail executives. “Retail is constantly evolving,” says Cheatham. “From the size of the prototypical store for each retailer, to their product mix, changes occur continually. More importantly, how a retailer reaches their customer has also changed. Omni-channel retailing is nothing more than a continuation of this evolution.”

WHAT RETAIL ISSUE DO YOU THINK WILL BE THE MOST IMPORTANT TO START A DIALOGUE ABOUT IN 2015? Continuing compressed footprints of national retailers and the growth of omnichannel retailing.

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Many luxury name brands are continuing to expand worldwide, including H&M, which is adding 375 stories, including one that will land at Tempe Marketplace this fall. RBC Capital Markets reported 40,000 U.S. retail store openings planned between November 2014 and 2015. Overseas, Dubai is building the world’s largest mall (8MSF) this year, reports Colliers International in its Global Retail Highlights for the second half of 2014. Right-sizing is still very much a thing, while retailers feeling the crush of online shopping are becoming more creative with the brick-and-mortar space they do have.

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provide education, advocacy, research and networking. We will have several events in 2015 that speak to each of these four pillars, inlcuding NetxGen events, the SW Idea Exchange and CenterBuild.

“It’s not about bricks or clicks. It’s about bricks, clicks and happy customers.” -Dave Cheatham

National vacancy for retail is 6.3 percent as of 2Q 2014, according to Colliers International. Phoenix saw an increase in rent per square foot rise to $22, a 26 percent year-overyear rent increase. In June 2014, UPS published “UPS Pulse of the Online Shopper,” a white paper featuring research by comScore, Inc. It found “long-term infrastructure investment will be required to support growing customer demand.” This begins with distribution centers, which allows orders to be fulfilled and increase transparency across retail channels, the paper

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continues. According to 2014 Forrester research, more than half of U.S. retail sales will be influenced by online store visits. This includes shipping items to a store for pickup, which has a 40 percent chance of leading to more onsite purchases. UPS reports that two-thirds of smartphone owners use their phones in-store for shopping to compare prices (36%), read reviews (27%), text friends about the product (25%). That same percentage of people, according to A.T. Kearney’s Omni-channel Shopping Preferences study, visit a physical store before or after making an online purchase. Obviously, with e-commerce and distribution centers, retailers are thinking about delivery times, which can influence retention of a customer — 50 percent of shoppers have abandoned an online shopping cart due to long delivery estimates or a lack of an estimate, according to UPS. However, about 83 percent of customers are willing to wait an additional two days for delivery in exchange for free shipping, this is particularly true for people who are ordering items that are not available at local retailers. “Shopping is one of America’s favorite entertainment venues, and that is not likely to change. A case in point is that the Mall of America has more visitors than Disney World in a given year,” says Cheatham. “It’s not about bricks or clicks. It’s about bricks, clicks and happy customers.”